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What Does FTE Stand For and How is Full Time Equivalent Calculated?

Budget
November 25, 2022
What Does FTE Stand For and How is Full Time Equivalent Calculated?

Table Of Contents

What is the meaning of FTE?

By definition, FTE is an acronym for Full-Time Equivalent. It is a measurement unit depicting a worker's weekly work hours. The amount of hours a full-time employee works for a company is referred to as an FTE. The goal here is to count how many hours are worked rather than counting the number of employees.

This measurement unit was created due to the necessity to determine how many full-time employees are equivalent to working hours if an enterprise has both full and part-time workers.

This financial term assesses the productivity of all employees, full-time or part-time, regardless of their employment status. Employers and businesses use this measurement to track employee workloads and make recruitment and budgeting plans for the future. It serves as a regulatory checkpoint and control mechanism, which in turn connects business statistics with research on how to analyze them in accordance with several regulations or receive the benefits of applicable programs.

what does fte stand for in business

‍How to Calculate Full-Time Equivalent (FTE)?

If your employees put in 40 hours a week, it means they are employed full-time. 2,080 hours are worked by a full-time employee who works 52 weeks a year. The annual working hours of your workforce can be added up and divided by 2,080 to determine FTE.

Consider that you have 17 employees that put in a combined 20,800 hours a year. This is equivalent to 10 FTEs. The same method can be used to create FTEs for a certain month, quarter, or even a single day.

Of course, not every full-time employee works for 40 hours a week and 52 weeks a year because of sick leaves, vacations, holidays and time-offs. You can add these to consideration while calculating EFTs.

Let's go step by step.

1st step: Make a list of your employees and their working hours.

You can create a board, chart, table or graph. Whatever you are comfortable with!

2nd step: Write down which schedules they are on.

Full-time or part-time.

3rd step: Calculate the hours according to your need.

You can calculate the hours worked per year or week. It is up to your need.

If you want to calculate the hours worked per year, you should multiply the hours by the weeks in a year, which is 52.

4th step: Calculate part-time FTE with easy calculation.

You just have to divide the total part-time working hours by the total full-time hours. Because with FTE, your determinant in the equation is the total full-time working hours.

5th step: Determine the total FTE

Add the number of full-time workers to the part-time FTE you just calculated.

That's it! Now you have the total FTE.

  • If you want an easier example of how to calculate FTE, don't worry, we are here for you.
  • It is really easy to calculate FTE and we will demonstrate it with simple numbers and examples!
calculating fte

Here is an easy example of how to calculate FTE:

Let's say full-time working hours for a week is 40 hours;

If one employee is working for 40 hours,

one works for 35 hours,

one works for 20 hours,

and another works for 10 hours.

To calculate FTE, you should add those together and divide them by the full-time working hours;

40+35+20+10= 105 hours of total working time per week,

105/40= 2,625 FTE

In other words, it is calculated that it corresponds to 2,625 full-time employees.

What are the benefits of FTE?

When you use FTEs, it's simple to measure how well you're doing at work, especially if you have part-time employees. You can contrast your staffing level with your competitors in your industry after converting part-time meters to FTEs. Additionally, FTE can benefit you in terms of making your work effort easier while calculating income, productivity, and profit per employee.

full time equivalent benefits

Project management

FTE offers a systematic method to determine the requirement for upcoming projects and the number of hours needed to complete tasks. As a result, it is a very beneficial measurement tool for long-term business strategy. You can determine how many hours your project needs, and after calculating the equivalent EFT of that hour, you can hire the number of people the project requires to be completed. In addition, you can hire part-time workers for short-term projects.

Determining the size of a company

Because FTE includes both full-time and part-time employees in the equation, you will be able to know the number of hours worked in the company rather than the employees. The twist here is that you will know the hours worked in your company by its equivalent to full-time workers!

Deciding on the capacity of a project

With FTE, you can hire full-timers and part-timers for the same project. This way, you can be able to have the average number of employees needed for a project to be done rather than overstaffing. Each employee can have a specific role, therefore, it would be easier for everyone to focus on their work without experiencing miscommunications, and each employee can contribute to the project knowing their exact role in the project.

Employers follow the rules

FTE can show employers when it is time to provide their employees with health insurance, and bonuses because they get timely information to keep in compliance with the law. Employers can determine whether to offer these to their employees when it is reached to a certain number of FTE.

fte calculation

Accounting and budgeting

This measurement tool (FTE) is really essential and critical when it comes to calculating and deciding on wages, also the costs of these payments when the wages are given to the employees.

It could be more beneficial in terms of finance when it comes to paying new part-timer employees for a project rather than overpaying already existing full-time workers. EFT can help a company discover these kinds of budget-friendly solutions.

FAQ

What is the difference between FTE and headcount?

F‍TE and headcount are two different tools when it comes to calculating the budget, hours, and requirements of the number of employees that will work on a specific project. The headcount of your business is simply the total number of employees. FTE stands for full-time equivalents, which is the number of full-time hours being worked at the organization. To calculate headcount, you just have to add up your employees.

What is %100 FTE mean?

A %100 FTE represents a full-time employee or the equal of a person who works on full- time schedule. Most commonly, companies define a full-time employee as someone who works for 40 hours per week. Similarly, you can also see "1.0 FTE" which means the same thing.

How do you convert FTE to hours?

Basically, you should reverse the equation. Take the number of FTEs and multiply them by full-time hours, and then you would have the total number of worked hours.

How to calculate an FTE salary?

A salary in full-time equivalent (FTE) is a payment that was equated to a full-time schedule for the entire year.

You can calculate an FTE salary by multiplying FTE by the amount of payment you decide to pay to a full-time employee, also then you can determine the profit you make per employee by dividing the company's net income by the number of FTE employees.

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