What Is Full-Time Equivalent FTE?

According to the IRS, a US employee who works at least 30 hours per week or 130 hours per month is considered to be a full-time employee. To be able to use this calculator smoothie, simply follow the instructions for both SBA calculation methods. For the SBA calculation method #1, to get the FTE, enter the number of full-time employees and the total sum of work hours by part-time employees.

Benefits of FTE

If you fall under the criteria for an applicable large employer, you’re required to offer health insurance to your employees. Plus, knowing your company’s FTE count will help reduce overall costs by forecasting employee hours and salaries. FTE refers to calculating the number of hours instead of the number of employees to forecast costs based on a full-time workweek. A full-time employee can be defined by a 40-hour workweek, 8-hours per day, 5 days per week. This is dependent on the company policies as few employers might recognize 40 hours/week and above as full-time. Generally, employers consider a full-time employee to work between hours a week.

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FTE is a valuable tool for organizations across various industries as it aids in efficient resource allocation, budgeting, and decision-making. According to the Affordable Care Act (ACA), an employee who works 30 hours per week, or 130 hours per month, is considered full-time. Under fte definition finance ACA, employers with at least 50 full-time employees are required to offer them health insurance. Full-time employees usually work more than 30 hours a week or more than 4 days a week. They’re also generally employed on a permanent basis as opposed to seasonal or temporary.

Why Calculate the Full Time Equivalent?

The Full Time Equivalent (FTE) represents a unit of measurement standardized to equal the number of hours worked by the typical full-time employee. First, you need to account for the hours of a full-time weekly schedule and the actual employee hours they would be scheduled to work. If it’s a 40 hour week, each employee that works 40 hours per week is equal to 1.0 FTE. When you are determining FTE, it’s important to know what a full-time workweek means to your company.

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After doing this comparison with all of their employees, the employer can get a total number of FTE employees (with an FTE of at least 1) and part-time employees (with an FTE of below 1). FTE is an important calculation for businesses that need to keep track of organizational costs, efficiency, overtime hours, work output, and the overall strain on certain departments. If you’re not sure where to start to track FTE, consider using QuickBooks Time , which helps organize employee hours and delivers helpful insights into your FTE calculation.

How is FTE calculated?

If you want to save time, why not use our free full time equivalent calculator template for excel to easily work out your company’s FTE. The full-time equivalent is an indicator that answers many of the questions Human Resources departments need answers to. This, therefore allows them to make better decisions regarding personnel management. To maximize the benefits of Full-Time Equivalent (FTE) and mitigate its challenges, organizations should implement best practices in FTE management. While headcount provides a straightforward count of the number of employees in your organization, FTE offers a more nuanced view of your workforce’s capacity. In this scenario, Employee A contributes half the workload of a full-time employee.

• By multiplying the number of FTEs by the average cost per FTE, HR can predict total labor budget needs more precisely than just using headcount alone.
• Make sure you don’t count in 1099 contractors since they are not considered employees.
• When tallying up hours worked, things like paid time off (PTO) and sick leave are included.
• A part-time graphic designer working 30 hours per week at that same company would have an FTE of 0.75 since they work 75% of that 40 hours.
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• In the realm of project management, Full-Time Equivalent (FTE) is a valuable tool for ensuring the efficient allocation of resources and tracking workforce contributions to project success.

Helps companies comply with ACA obligations

• To calculate FTEs, add together the number of hours worked by all part-time employees and divide that total by the number of hours worked by full-time employees.
• As for the calculation method #2, enter the number of full-time employees again and just the number of part-time employees to calculate the FTE.
• You’re left with 31.3 (rounded to the nearest tenth) which is equal to how many full-time employees you would need to fulfill those 250 hours of project time.
• Knowing how to accurately calculate and strategically apply FTE analysis helps optimize staffing, forecast budgets, align talent strategy to business goals, and support employee retention.

The ratio of full-time to part-time employees impacts company culture, engagement, and retention. The Paycheck Protection Program (PPP) was launched by the US Small Business Administration (SBA) to help businesses keep their workforce employed during the Coronavirus (COVID-19) crisis. If you want your PPP loan to be completely forgiven, you need to keep the number of FTEs during the 24-week PPP period the same as it was prior to COVID-19. So, how can you calculate the FTE of your company and make sure you’re eligible for PPP? In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees.

In practice, these numbers fall somewhere between 30 and 40 hours per week, with 40 hours per week (8 hours per day, 5 days per week) being the most common norm for a full-time schedule. As for the calculation method #2, enter the number of full-time employees again and just the number of part-time employees to calculate the FTE. All you need to do is enter how many hours of work are required to complete the whole project (estimated time) and then how many hours a day your employees will work on that specific project. 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. Leveraging FTE analysis can significantly contribute to optimizing the workforce budget. By understanding the FTE value of your workforce, you can make informed decisions on hiring, developing, or restructuring to ensure financial efficiency and productivity alignment.

Basic formula and calculation methods

Human Resources departments often use FTE to figure out how to set the working hours and salaries of employees. It’s important to keep in mind that it doesn’t indicate the actual number of employees, but rather the actual hours worked. Three full-time employees would have an FTE of 3.0 and the part-time FTE is 0.875. Many times, FTE is confused with “full-time employee”, so before we move on to the details and procedure to calculate metrics lets look at what is the difference between the two concepts. The workforce of an enterprise, activity, or country etc. can then be added up and expressed as the number of full-time equivalents.

This calculation reveals not just the number of employees but the extent of their contribution in hours worked, thereby providing a clear picture of the actual workforce size. In this article, we’ll explore the concept of Full-Time Equivalent (FTE), its significance in workforce planning, practical calculation methods, and its implications for HR management and business operations. 0.97 is close to 1, which means the employee almost worked full-time hours. Employers can take these definitions — or lack thereof — and use them to inform their own. Full-time equivalent (FTE) compares the number of hours an employee works to the number of hours their employer considers full-time. She started her career writing and editing content about home services before transitioning to home improvement products.

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