FTE Full-Time Equivalent

full time equivalent

For example, if you’re hiring four employees at 0.25 FTE, you have to expend four times as many resources to onboard and train them. That may not be a massive deal at some companies, but it’s significantly more work hours before everyone operates at the right level. Larger employees (50 FTE or more) typically use 30 hours as full-time because that’s the threshold for some benefits. Smaller companies are more likely to use 40 hours, the standard work week. Calculating full-time equivalent (FTE) hours for a business has many benefits, but why does it matter, and how do you do it?

  • In this context, an employee who works 20 hours a week would be 0.5 FTE, while someone who works 10 hours would be 0.25 FTE.
  • The measure is often annualized to cover the average annual full-time equivalent students and is designated by the acronym AAFTE.
  • Let’s say you have four full-time employees, three part-time employees working 20 hours a week for 30 weeks per year, and one part-time employee working 15 hours a week for 52 weeks per year.
  • That may not be a massive deal at some companies, but it’s significantly more work hours before everyone operates at the right level.
  • In general terms, full-time equivalent (or FTE) is a unit of measure that plays an important role in calculations used in businesses, project management, or federal programs for eligibility purposes.

An FTE salary is an employee salary converted into a full-time equivalent salary within a full year, regardless of whether the said employee holds a full-time or part-time position. The actual workload is not taken into consideration for this calculation. Since both are considered to be full-time schedules in their respective companies, both count as a 100% or 1.0 FTE. However, the IRS mandates only 30 hours per week or 130 hours per month for an employee in the US to be considered full-time in terms of the type of employment.

How Do You Work out the FTE?

The underlying period can be, for example, a day, a month or even a year. Being a basic criterion in staff controlling, it is one of the most important staff indicators for companies. Particularly due to the development in the part-time sector, your staff planning will be more comprehensible and controllable with this ratio. Focusing too much on FTE can also make it harder to balance people’s schedules and keep them happy with their work.

Is FTE 40 hours?

FTE is based on a full time equivalent of a 40 hour work week. Using the number of hours you intend for the employee to work (estimate the average if it is not exact) divide by the full time equivalent of 40.

Full time equivalent allows you to calculate and analyze your workforce a lot more accurately, and also explains how much value and workload you’re getting out of part-time staff in comparison to a full-time baseline. Following the above definition, an FTE of 1.0 is equivalent to a full-time worker while an FTE of 0.5 signals half of a full workday. For buildings with more unusual occupancy patterns, you would still calculate the FTE building occupants based on a standard eight-hour occupancy period. FTE salary is most often used by companies rather than individuals. It indicates what a company could spend on a part-time employee if they worked full time. This provision also requires employers to give employees 1095-Cs for tax purposes and to determine whether the ALE owes further payments or penalties.

Full Time Equivalent (FTE)

There are simpler FTE calculations that you can use for employee management or cost analysis. For example, you can compare a part-time worker’s salary to a full-time worker of the same seniority or role to ensure that they are being treated fairly. If your full-time worker makes $60,000 per year, and you have a part time worker who is 0.5 FTE (working 20 hours per week), they should be making $30,000 if you want all things to be equal. You might look at your workforce and think “Wow, I have 30 people working for me, why is productivity low? FTE has many uses; as stated above, business analysts use it to calculate the labor cost and the number of employees required to complete a project.

full time equivalent

Some are based on the number of Full-Time Equivalent workers a company employs. To calculate a salary based on the FTE hours, take the salary of a full-time employee and multiply it by the FTE of the employee. 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.

EN_How To Easily Calculate the FTE of Your Company

Appeared in G2 Crowd Learning Hub, The Good Men Project, and Pick the Brain, among other places. FTE has several different uses and several different calculation methods, depending on why you want to calculate it. It will help you plan your project work, set deadlines, and work out your budget. fte meaning Within this method, the employee is credited with 8 hours for each day they would be required to work at least 1 hour (including PTO). Those five workers are in fact equivalent to 3.37 full-time workers. Three full-time employees would have an FTE of 3.0 and the part-time FTE is 0.875.

It can also do the same for a full-time employee who hasn’t completed a whole year of work yet. The larger your company, the more data you will need to aggregate and the more complicated the formulas for calculating your workforce full-time equivalent will become. This is mostly the case if your company has several establishments. If your company is a large account, there are other ways to help you save time and simplify this process. In all cases, you should choose the most efficient solution for your company, taking into account the financial and time investments. With so many employment intricacies, it’s crucial you clearly distinguish between each type of employee, especially if you’re managing a large global team.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *