What is Full-Time Equivalent FTE & How to Easily Calculate It

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. FTE is calculated by adding up the total number of hours worked by all employees and dividing that total by the number of hours in a full-time work week, which is typically 40 hours. With 14 employees, 7 of which fte meaning 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. As you can see, the part-time employees are converted into the performance of a full-time employee. So the FTE is not the number of employees in a company, but the equivalent of a full-time employee.

How to work out FTE for your company

You may need to combine multiple systems to track more complicated metrics. Select relevant KPIs that are connected to business goals and set a target score for each KPI. Identify key areas where analytics will help you solve problems and meet goals that add value to the organization from a business perspective.

Greater Performance Review

When calculating your FTEs for basic accounting or business purposes, the simplest way to do it is to divide total annual work hours for all employees by an average full-time annual work schedule. To calculate the full-time equivalent in your company for each employee, you’ll need to account for the hours of a full-time weekly schedule and the actual hours your employees are scheduled to work. A typical or full-time work week usually consists of 40 working hours without paid or sick leave.

• Knowing your number of FTEs is important for assessing business performance, and it’s required under the Affordable Healthcare Act (ACA) and for certain tax credits.
• Add the full-time FTE (in this case, it’s 2.0 since there are two full-time employees) to the part-time FTE from the previous step (1.5).
• The IFTE of 4 employees equals 160 work hours (assuming a regular work week has 40 hours).
• Each FTE represents the fully loaded expense of having one full-time permanent employee on staff.
• FTE calculations make it easier for you to assign different personnel to different projects or specific tasks based on their overall performance and contribution to your company.

How FTEs Work

Fear not, as we’ll reveal ways to bill a client accurately through a few easy steps. Stay on top of FTE trends and leverage HRIS tools to master this essential workforce metric. Trends in this ratio can show which teams are operating efficiently and which may be over or understaffed relative to output. Sudden changes or churn in FTE numbers can serve as an early warning for HR of underlying staffing problems or challenges. Ever feel like your days disappear faster than a magician’s rabbit?

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What’s important is that “on average” they work under 30 hours a week. To get a good estimate, it’s best to average hours over a 90- or 120-day timeframe. In addition, if you’re calculating FTE https://www.bookstime.com/articles/brewery-accounting for ACA purposes, you’d only include the part-time person in your calculations if they worked 120 days or more per year. In our example, Jimmy and Marta would be considered part-time employees.

• For instance, in terms of business, calculating FTEs can be useful in determining how many hours part-time employees should work to equal the number of hours full-time employees work.
• Simply put, full-time equivalent is the total number of hours worked by an employee to meet the requirement for full-time status.
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• A full-time equivalent (FTE) is a unit of measurement used to determine the amount of full-time hours worked by all employees in an organization.
• You’ll find the answers to all these questions and more and learn how to calculate FTE step-by-step.
• If you have a mix of full-time and part-time employees, the full-time equivalent (FTE) lets you represents the full-time hours that all of the employees in your business work.

This enables HR to categorize employees, analyze, gain valuable insight for business planning and projection, and boost the organization’s efficiency. Let’s say those 35 employees all work 20 hours per week, while the remaining 165 work 40 hours per week (considered full-time at your organization). For example, headcount reporting might tell you that you have 200 employees in your organization today.

FTEs calculator for project managers

• 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.
• Based on the FTE value, some of your employees could be eligible for minimum or affordable healthcare insurance.
• Calculating FTE even gives small businesses insight into whether they’re paying too little or too much in project costs.
• To determine your eligibility for the small-business tax credit, you’ll need to use a different system for counting FTEs.
• New, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.

Now, the exact number of hours that a 100% FTE represents will depend on your company’s policies and the various labor laws in your state, country, and more. The IFTE of 4 employees equals 160 work hours (assuming a regular work week has 40 hours). FTE for one full-time employee equals 1, for 3 employees, equals 3. FTE allows companies to assess workforce capacity and the real performance of their team, the individuals within that team, entire departments, or even the company as a whole.

• The ACA defines a full-time employee as someone who works 30 hours per week or 130 hours per month.
• FTE is a very specific term used to calculate whether a company is required to provide benefits under the Affordable Care Act (ACA) and the Family Medical Leave Act (FMLA), for example.
• Now add the total number of hours worked by full-time employees to that of part-time employees to get the total number of hours for all employees.
• It could also be a temporary staff member who works an irregular schedule.

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? If you don’t know what it means, you should, as this metric can help you make important decisions. Through the full time equivalent calculation, it is possible to identify whether your small business needs to hire, restucture or reduce its staff, for example. Multiply the total hours worked in a week by 52, the number of weeks in a year, to find the number of hours worked annually.

Compare your estimated vs. actual hours worked