What is a Full-Time Equivalent FTE? Definition Meaning Example

One FTE does not necessarily equal one employee; one employee working 40 hours per week is equivalent to one FTE, but two employees working 20 hours per week each are also equivalent to one FTE. Full-time equivalent, or FTE, measures the total amount of full-time employees working at any one organisation. It is a way of adding up the hours of full-time, part-time and various other types of employees into measurable ‘full-time’ units. 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.

This process requires establishing the hours every employee is scheduled to work. Subsequently, companies must divide the actual scheduled hours by the number of full-time hours. Now, it’s important to note that this FTE result does not necessarily reflect actual FTE employees. After all, people take time off work, vacations, sick leaves, etc — all of which reduces their hours worked and has an impact on your workforce planning process. That said, there are limitations to this calculation method — for instance, employees may be unable to work more than 40 hours per week due to their company’s policies or other factors outside of the project itself.

Why do companies calculate Full-Time Equivalent (FTE)?

There are several ways to break down that 62.5, depending on your needs. You could choose to assign six full-time employees and one part-time employee to work on the project for 10 days. Or you could allocate work to 12 full-time and one part-time resource for five days. Increased employee morale typically translates into increased productivity and performance, allowing a larger number of employees to complete the same amount of work with fewer FTEs. FTE is a commonly used statistic for determining staffing requirements and workloads, as it indicates the total number of hours worked by an individual or team.

• A full-time equivalent (FTE) — also known as a whole-time equivalent or WTE — represents the sum of all full-time hours employees work in a certain company.
• To calculate the total FTEs for your business, you need to add up the hours worked by all employees, both full-time and part-time.
• Full Time Equipment is based on the total number of hours worked, and not the number of people employed by an organization.
• If your company considers the number of hours for a full-time position as 40 hours per week, note that working 30 or more hours counts as 1 FTE for purposes of ACA compliance.
• The actual workload is not taken into consideration for this calculation.

If you increase your opening hours and are open every day of the week, then you have a 0.875 FTE. If the trucks open at the same time, then you require two different people to run them. For example, say you run an ice cream van five hours per day, four days a week (20 hours per week).

Employers follow the rules

It is important to remember that this computation assumes that all FTEs work full-time hours with no overtime or extra hours. The workplace can become more creative and productive when more individuals collaborate, share ideas, and build on one another’s work. Even though increasing the number of full-time equivalents (FTE) may result in more creative work, it is crucial to realize that creativity has many different components and is influenced by a variety of factors. While the Full-Time Equivalent (FTE) metric offers invaluable insights into workforce dynamics and assists in strategic decision-making, it has limitations. Understanding these drawbacks is essential to ensure balanced and comprehensive human capital management. As you can see, FTEs are a valuable tool for businesses of all sizes and can be used in various ways to improve efficiency and optimize resources.

• It features the popular Pomodoro technique, which encourages users to focus on one task at a time for 25 minutes, then take a 5-minute break before starting the next task.
• This, therefore allows them to make better decisions regarding personnel management.
• With the variety of working options available today some employees may work part-time while others may only work at certain times of the year or in several other flexible ways.
• With Clockify, you can easily track your cost rates per employee and then compare and contrast them with employee billable hourly rates.
• Keep on reading to learn what FTE is, how it is calculated, and how it is used in project management.
• 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.

A recent project took 20 hours less than anticipated, so you need to adjust your staffing levels accordingly. You can calculate the FTEs required for the project by estimating how many hours each task will take and then adding them all up. Understanding FTEs helps businesses optimize their workforce and provides invaluable insights into their organizational structure, enabling efficient resource allocation. This nuanced comprehension can lead to more effective workforce planning, budgeting, and operational efficiency. Identifying which employees are FTEs is essential for a number of reasons ranging from workforce planning to adhere to employment laws under the Affordable Care Act. Yearly, a company generally considers an FTE to be valued at 2,080 hours.

What does FTE (full-time equivalent) mean?

This is typically 40 hours per week, however it might vary based on the firm or industry. A 100% FTE is generally compared to part-time or reduced-hours employees, who are regarded less than 100% FTE. To calculate the FTE, divide the figure by the number of hours per week required for a full-time position (40 hours per week). When determining FTE (full-time equivalent) for a business that employs seasonal workers, the number of hours worked by those employees during the season, as well as the number of weeks they are employed, must be considered. When your company’s profitability rises, it means it’s making more income. The term “full-time equivalent,” or FTE, refers to the number of part-time employees who provide a company with the equivalent of full-time hours.

In general, full-time means an employee who works 40 hours per week, although this can vary depending on the organization. 100% FTE or 1.0 FTE refers to one full-time employee or a number of people who make up the duties of one full-time position. To calculate an FTE salary, you must convert an employee salary into a full-time equivalent salary within a full year, regardless of whether the employee has a full-time or a part-time position. Essentially, the FTE is the number of determined full-time positions in an organisation. It is used to count employees depending on their degree of employment. For example, if your business pays a certain type of employee $40,000 a year for a full-time 40-hour workweek, an employee who works 25 hours a week would have an FTE of 0.625 and a salary of 40,000 x 0.625, or $25,000.

In this article, we’ll teach you everything that you need to know about calculating this metric and why it matters. Therefore, eligible employees may obtain affordable and minimum health insurance coverage thanks to FTE calculations under the Affordable Care Act. Any employee having at least 30 working hours per week (or 130 a month) is considered a full-time employee under this bookkeeping for startups act. 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. As a rule of thumb, the equivalent number of part-time workers is derived by dividing the total number of working hours by the number of hours worked by a full-time employee.