What is FTE and How is it Calculated?

Generally, contractors are not counted as FTEs unless they are considered equivalent to full-time employees. For example, let’s say a company considers 40 hours per week as full-time employment. If an employee works 40 hours per week, they are considered a full-time employee. However, if another employee works only 20 hours per week, they would be considered half-time. FTE (full-time equivalent) refers to the unit of measure that helps businesses calculate the number of hours their employees work.

Why Is Full-Time Equivalent Important for Your Organization?

Finance teams will also be interested – ånd revenue per FTE can also be calculated from this. When tallying up hours worked, things like paid time off (PTO) and sick leave are included. However, external contractors and freelancers are generally not included in the FTE count. This enables useful comparisons across teams and functions for organizational planning and analytics.

On the other hand, full-time equivalent refers to the equivalent number of full-time employees at your company. Just indicate how many employees work at your company, how many hours they work a week, and for how many weeks. 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. Furthermore, this value is used only as a basis for calculating the annual FTE and reflects the hours of an employee who works 5 days a week, 8 hours a day.

Compliance Issues

To find the equivalent of a full-time day, divide the total number of hours by 8. To calculate the full-time equivalent employee following steps are to be followed – After completing the project, you can remove them without any negative effects of the termination of an employee. While often used interchangeably, FTE and headcount represent different aspects of a workforce. This metric offers a standardized way to measure employee contributions, regardless of their employment status or irrespective of an employee’s scheduled hours.

The Importance of Determining FTEs

Here, we discuss the impact of these changes and the role of technology in FTE tracking and analysis. With the right FTE strategies, you can not only optimize your staffing, but also improve your company’s productivity and efficiency. Track Employee Activity on PC – Efficiently manage work hours and boost productivity with the best employee screen monitoring software.

This transparency is often viewed as a crucial component of CSR, as companies are obliged to disclose accurate information about their operations. It also fosters trust among stakeholders and conveys an image of the company prioritising honesty over manipulation for potential gains. In all these scenarios, understanding FTE measurements aids companies in managing resources effectively and efficiently. By appreciating how the FTE scale works inside evolving work models, businesses and individuals can better navigate the shifts in today’s labor market.

By understanding and using FTE, organizations can make informed decisions regarding their staffing needs and optimize their operations for maximum efficiency and productivity. While both FTE and headcount provide insight into workforce metrics, they are not the same. Headcount refers to the actual number of employees in an organization, regardless of their working hours. FTE, on the other hand, provides a more accurate representation of total work being done since it accounts for both full-time and part-time employees.

FTE Calculation Formula

It’s used to determine the overall number of full-time hours that your team or business as a whole is able to perform or has performed during a certain period of time. FTE or full-time equivalent is a tool to help you gauge the potential productivity of your business or company. Using the FTE method, hiring managers will better understand the type of employees they need to hire while staying within the budget constraints. And once the employee is on board and inducted, the same method can help allocate the projects according to their bandwidth. With this, any company can adjust its hiring process and predict the budget based on how much work is required and how much can be delivered.

For weekly calculations, FTE equals total hours worked divided by standard weekly hours (e.g., 40 hours). Monthly fte full form in company FTE is total hours divided by standard monthly hours (e.g., 160 hours). Yearly FTE divides total hours by standard yearly hours (e.g., 2,080 hours).

• If your company considers 37.5 hours as full-time instead of the standard 40 hours, divide the total hours worked by 37.5 rather than 40.
• The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours.
• Generally, contractors are not counted as FTEs unless they are considered equivalent to full-time employees.
• For example, if you have part-time employees working various hours, sum all their hours to find the total part-time hours before dividing by the standard full-time hours.

By tracking the working hours of all staff, you can accurately calculate your total hours worked and gain a clear understanding of your workforce’s true capacity. Let’s take a look at an example scenario to help you better understand how to do this. This section provides a step-by-step guide to calculating FTE (full-time equivalent).

• The practical difference becomes clear when you consider that five part-time employees working 20 hours each would equal 2.5 FTE but represent a headcount of five.
• In some jurisdictions, FTE calculations are tied to employment laws and regulations.
• This method optimizes workforce distribution without overspending on staffing.
• FTE values that are greater than 1.0 represent a greater workload that goes beyond a single full-time employee, while values less than 1.0 represent part-time workloads.
• Your total FTE count becomes 4.25, giving you a clear meaning of your actual workforce capacity.

FTE and Employment Status

For example, if full-time employees work 40 hours per week, four employees working 10 hours per week would be equivalent to one full-time team member, or 1.0 FTE. If your company has full- and part-time workers, calculating FTE is generally more accurate than counting employees, as it helps assess the number of hours the team dedicates to weekly tasks. It can also help determine how many people to schedule for a shift or whether you need to hire additional workers.

FTE plays a huge role in resource planning for companies across various industries. Knowing FTE helps you plan staffing, budget smartly, and make fair decisions about benefits and compliance. It’s the key to unlocking the full potential of your team and your business. FTE helps organizations track staffing levels, manage resources efficiently, and compare workloads across departments or projects.

Mixing up FTE and headcount in budget planning can lead to significant miscalculations. Understanding the distinction between FTE and headcount is essential for strategic workforce planning and achieving your business objectives. While these terms are often used interchangeably, they represent fundamentally different metrics that provide unique insights into your organization’s human capital. When working with multiple definitions across different departments or locations, create separate calculations for each group. This approach provides a more accurate tool for workforce planning and helps maintain efficiency across diverse operational structures. Let’s walk through a practical scenario to demonstrate how to calculate FTE for your payroll and staffing decisions.

Smarter Resource Allocation

You can also use an FTE calculation to determine the appropriate pay for part-time workers. To identify the FTE for a specific part-time position, just divide the number of hours worked by the employee by the number of hours considered for a full-time worker. To identify the FTE for part-time positions, divide the total number of part-time hours worked by the number of hours worked by one full-time worker.

0.5 FTE is the number of hours required for a part-time worker, approximately 20 hours per week. An FTE 100% is a full-time employee, the one working 40-hour workweeks (also known as an FTE 1.0). Some employers may also consider 37.5 hours a full-time work week if lunch breaks are unpaid.