Full Time Equivalent FTE Definition, How to Calculate, Importance
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. The first step to calculating the FTE of your company is to fte meaning make a list of all of your employees. So, whether you’re a business owner, HR professional, or just curious about how work can be measured, understanding how to calculate FTE is a crucial part of effective workforce management.
Particularly due to the development in the part-time sector, your staff planning will be more comprehensible and controllable with this ratio. When using FTE alongside other performance metrics, it can be easier to understand per-employee costs and output in a large organization. With Clockify, you can easily track your cost rates per employee and then compare and contrast them with employee billable hourly rates. An employee with a regular budgeted assignment of 75% of a full-time job position has a 0.75 FTE.
Full Time Equivalent (FTE) Calculator Formula
However, if your company employs part-time employees as well, several of them together may equal 1.0 FTE. To calculate the FTE for all employees in your company, consider the full-time and part-time employees you employ. Whether an FTE of 0.75 is considered full-time will depend on the company policy made by the employer.
In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees. Employers can use FTE to evaluate their hiring capacity and current payroll, as well as for reporting purposes related to labor laws and employee benefit programs. In practice, FTE is measured by companies to estimate the number of full-time employees employed within a specific time frame. With 14 employees, 7 of which are full-time and 7 part-time, the staffing capacity is 9.04 full-time employees per year. First, it is necessary to determine the number of hours worked by part-time employees. In other words, do you know what the full time equivalent is and how it can help you better understand the needs of your organization?
What Is FTE & How to Calculate It
To calculate the number of hours your employee is expected to work based on their FTE, you’ll need to reverse the previously mentioned process of calculating FTE based on the number of hours worked. The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours. Tracking FTEs over time also allows HR to identify growing or decreasing expenditure on salary and benefits. Finance teams will also be interested – ånd revenue per FTE can also be calculated from this. Yearly, a company generally considers an FTE to be valued at 2,080 hours.
- If you run payroll weekly, you’ll likely have this data available.
- As you can see, the part-time employees are converted into the performance of a full-time employee.
- The method for calculating FTE is slightly different for each of these uses.
- If you have at least 50 FTEs employees, you are an ALE for the year, which means you are subject to specific reporting requirements and share responsibilities under the ACA.
- Altogether, those 18 employees only account for the hours of 4.5 full-time employees.
- In other words, FTE allows companies to standardize headcount and measure workload capacity by converting part-time staff to a full-time basis.
A part-time graphic designer working 30 hours per week at that same company would have an FTE of 0.75 since they work 75% of that 40 hours. You can then determine the equivalent number of full-time workers you employ. Full-time equivalent (FTE) is a measurement employers use to standardize their headcount.
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This could be an employee who works 20 hours a week, an intern who works one day a week, or an employee who is on call or only works weekends. It could also be a temporary staff member who works an irregular schedule. Salaried employees who work full time or are expected to work a full-time schedule (even if they don’t report their actual hours each week) are considered full-time employees in both cases. The FTE employee doesn’t have to actually exist, and can be a combination of part-time employees.
