Calculating Full-Time Equivalent (FTE) is crucial for organizations to assess their workforce capacity accurately. The full-time equivalent is an indicator that answers many of the questions Human Resources departments need answers to. This, therefore allows them to make better decisions regarding personnel management. So, with all the previous steps in mind, let’s calculate the actual FTE based on the specific numbers we’ve used. FTE or full-time equivalent is a tool to help you gauge the potential productivity of your business or company.
Altogether, those 18 employees only account for the hours of 4.5 full-time employees. The Fair Labor Standards Act (FLSA) doesn’t define what full-time or part-time employment is for any employer. The annual hours for your part-time employees (C, D, and E) add up to 3,120 (1,560 + 1,040 + 520). The annual hours for your full-time employees (A and B) add up to 4,160 (2,080 x 2). This calculation reveals that, while the company has five employees, their total workload is equivalent to 4.25 full-time employees. I used a part-time work example, but you might want to know how to calculate FTE for salaried employees, too.
Finally, small business owners in the United States need this metric to see if they can apply for a tax credit in the amount of 50% of the employer-paid health care premiums. Employers can use FTE to guide their hiring strategy and plan for a project, while governments often use the metric to determine program eligibility. While FTE itself doesn’t directly measure the impact of remote work, it can be used as a starting point. If you can find a good, accurate FTE benchmark for your remote workers, you can staff up based on it. You must stay on top of the most recent federal and state labor laws to avoid legal, financial, and reputational damages.
Step 2. Define the number of hours for a full-time position
If an employee works 20 hours a week for this same company, they only work half the amount as a full-time employee and are 0.5 FTE. An employee who works 60 hours a week works 1.5 times as much as a full-time employee and is considered as 1.5 FTE. We’ll assume that where you are, full-time employment means working 8 hours a day, 5 days a week, for 52 weeks a year. Benefits like paid time off and maternity/paternity leave are all included within the number of hours worked, so don’t worry about accounting for these hours. There is a strong relationship between your staff’s FTE and your company’s efficiency. By optimizing FTE, you can better distribute the workload and ensure that employees can do their work more efficiently.
In healthcare, FTE calculations often revolve around patient-to-staff ratios, bed occupancy rates, and clinical workload. Each industry tailors FTE calculations to align with its unique operational needs, service demands, and regulatory requirements. Companies use full-time equivalent (FTE) measurements because they provide a standardized way to evaluate and compare the workload and contributions of employees, even when their work hours vary. A full-time equivalent, often shortened to FTE, serves as a standard measure for employed individuals or students, allowing for comparison even if their weekly working hours vary. Knowing FTE helps you plan staffing, budget smartly, and make fair decisions about benefits and compliance.
Plan your hiring for a project or new business
- Simply put, FTE stands for Full-Time Equivalent, a metric that helps businesses measure the number of full-time employees they would need to complete the work currently being done.
- If the company considers 30 hours as full-time, an employee working 30 hours would be a full-time equivalent employee.
- Someone working 20 hours per week, or 0.5 FTE value, would earn $50,000 if the wage is $100,000 for a full-time employee.
- Next, divide the above number by the ideal number of work hours for a full-time employee per month.
- Monthly FTE is total hours divided by standard monthly hours (e.g., 160 hours).
When comparing a part-time worker’s wage to that of a full-time worker, the FTE number becomes relevant. A full-time employee is the basis for determining the wage for this position. Someone working 20 hours per week, or 0.5 FTE value, would earn $50,000 if the wage is $100,000 for a full-time employee. A person may make $75,000 working 30 hours, which is equivalent to 0.75 FTE. FTE 100% means a full-time employee or someone working the equivalent of a full-time job. While most businesses use 40 hours per week to denote full-time employment, some use different numbers.
FTE in relation to overtime and leave
Why is it important for companies to know their full-time equivalent? A business’s FTE of its employees, or what does 1.0 fte mean similarly, a school’s FTE of its students, can impact several areas. The FTE definition refers to the number of hours of work of a full-time employee. Depending on how big a company is, the ERC is calculated differently. The Employee Retention Credit (ERC) is another measure designed to incentivize employers to keep hold of staff during the COVID-19 pandemic. It comes in the form of a tax credit worth half of employee wages over the course of a covered period.
Calculate Salary, Bonuses and Benefits
Figure out your FTE count to see if your employer must offer such perks. The Affordable Care Act (ACA) is designed to reduce the cost of health coverage for uninsured and lower-income individuals and their families. Under the ACA, some large employers might be responsible for providing minimum essential coverage or making shared responsibility payments to the IRS. With labor market changes and technological advancements, companies need to be flexible and technologically advanced to optimize their FTE management.
What Can I Do If My Employer Didn’t Pay Me on Payday?
To calculate the Full-Time Equivalent, simply divide the number of hours an employee works by the number of hours the company counts as full-time. You may have heard the term Full-Time Equivalent (FTE) in the context of the number of employees working, the salary employees receive or the benefits a company is mandated to give their workers. The Paycheck Protection Program (PPP) is designed to prevent job losses during the pandemic by giving loans to small businesses to cover payroll expenses and other costs. A portion of this loan can be forgiven based on the number of FTE workers an employer has on its payroll. For example, measuring FTE from month to month, or even week to week, helps to track overall workloads and expected employee output, even as part-time schedules chop and change.
- In order to plan, predict, staff, and compute salaries, the idea is to keep track of “hours worked” instead of the total number of workers.
- In this case, two individuals who work 20 hours each week would be considered 1.0 FTE.
- If you increase your opening hours and are open every day of the week, then you have a 0.875 FTE.
- In this case, 0.9 FTE would equate to 36 hours, as full time is 40 hours.
HR departments often use FTE salaries to determine their part-time workers’ compensation. A part-time employee’s FTE salary is calculated by multiplying their FTE value by the salary allotted to an equivalent full-time employee. For instance, let’s say a full-time graphic designer working 40 hours per week makes $48,000 per year.
Yearly FTE divides total hours by standard yearly hours (e.g., 2,080 hours). Part-time and seasonal workers contribute to FTE by calculating their hours worked as a proportion of full-time hours. For example, if a part-time employee works 20 hours per week and standard full-time hours are 40, their FTE would be 0.5. Similarly, seasonal workers’ hours are prorated based on their duration of employment.
FTE is important for calculating labor costs incurred by your company. By determining your company’s overall FTE, you can plan in advance and manage your payroll expenses. This will also help you ensure you are not over or understaffed. A single full-time employee represents an FTE of 1, while part-time employees have a 0.5 FTE (or half that of a full-time worker).
In step 4, we learned that the total number of work hours for all employees in a single week equals 153. The list should contain the names of your employees as well as the full number of work hours for a single week. Try to include employee leave (both paid and unpaid) in the overall number of work hours to make your results more accurate. Calculating headcount is as simple as adding up the number of people on your payroll, while FTE refers to the number of full-time hours being worked at the company. For example, if a full-time job is 40 hours per week, and you have only two employees working 20 hours per week, your company has a 1.0 FTE.
In this blog, we explain what FTE (Full-Time Equivalent) is and why it’s important for your organization. We’ll show you how to calculate FTE, taking into account flexible working hours and working from home. For all intents and purposes, your business requires 4.25 employees to function.
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