What is an FTE employee?
An FTE employee is the total number of employees required to equal an FTE because FTE stands for the number of hours worked per week. An employee who is scheduled to work a 40-hour workweek, for instance, is regarded as 1. 0 FTE. An employee who only works 20 hours is 0. It would require two part-time workers to equal 1 FTE, so 0 FTE. Similar to this, five workers putting in just five hours each would still equal one. 0 FTE.
When a company has a lot of part-time employees, it can be helpful to translate their hours into full-time equivalents to determine how many full-time employees they translate to.
What is FTE?
FTE stands for full-time equivalent, though “WTE” (whole-time equivalent) may also be used to refer to it. It is a unit of measurement that represents how many hours one employee works during a week. How much FTE is used in project and resource management to assess staffing requirements or report hours worked is another way to look at it. It harmonizes the methods for measuring the time, money, and labor costs associated with a project.
How to calculate FTE
Here are steps to calculate FTE:
1. Determine what you mean by full time
‘Full time’ has different meanings depending on the industry, region, and nation. A typical full-time workweek in the United States is 40 hours, though some countries may only view 35 hours as full time. Some people may define full time using weekly, monthly, or yearly time frames.
2. Calculate the number of full-time hours
The number of hours in a typical workday can be multiplied by the number of working days in a week to get weekly hours. For instance, your weekly full-time hours are 8 x 5 = 40 if your company schedules employees to work eight hours per day for five days per week.
A monthly total based on the 40-hour workweek would be 160 hours (40 x 4 = 160). The sum would be 2,080 per year (40 x 52).
3. Use that full-time determination to calculate the employees FTE
Take a look at the actual weekly working hours that each employee is scheduled for. Divide the actual scheduled hours by the number of hours you consider to be full-time for that employee to get their FTE. Scheduled hours / full-time workweek = percentage of FTE would be the formula.
You may also see FTE expressed as a percentage. A 100% FTE is the same as a 1. 0 FTE. Similarly, a 50% FTE is the same as a 0. A 0 is equal to 5 FTE and a 75% FTE. 75 FTE.
For instance, if your business defines full-time employment as 40 hours per week and each of your employees is scheduled to work 40 hours, they would each have an FTE of 1. 0. Their FTE would decrease to 0 if all of your employees worked 20 hours a week at part time rates. 5 (20 / 40 = 0. 5).
Employees at a business with full-time hours of 38 would also have an FTE of 0 if they worked 16 hours per week. 4 (16 / 38 = 0. 4). If your business defines full-time work as 36 hours a week, but an employee is only scheduled for 24 hours, their FTE would be 0. 6 (24 / 36 = 0. 6).
You divide the employee’s actual scheduled hours for the month or year by the number of full-time hours in the month or year to determine an employee’s FTE based on monthly or annual totals. As a result, a worker who clocks in 80 hours per month at a business where the full-time equivalent is 160 would have an FTE of 0. 5 (80 / 160 = 0. 5).
The Widget Company is submitting a bid for a contract that should take 500 hours to complete. The bid specifies a 40-hour turnaround time for the work. The boss used the FTE equation. In this instance, the calculation would be 500 (total hours) / 40 (weekly hours) = 12. 5 FTE. That means 12. To complete the workweek, five employees must put in eight hours per day.
There are only three part-time (20 hours per week) and nine full-time (40 hours per week) employees at the business. The owner determines the company has a 10. 5 FTE. Using the FTE equation (500 / 10. 5), the task would require his team to finish it in almost 48 hours. The employer must now choose whether to reject the bid or hire someone to work eight hours.
Why is FTE important?
FTE is significant because it provides a consistent way to measure the availability of employees. This simplifies making calculations about total employee availability and costs. There are a number of beneficial applications for FTE, most notably in the areas of project management, budgeting, payroll, and other human resource-related areas.
Here are a few real-world applications of FTE to show its value:
Example 1: Project management
A project requires 400 work hours to complete. Using FTE, you can determine how many employees you’ll need. Since there are eight full-time hours in a day, the task can be finished in 50 FTE hours (400 / 8).
With this information, you can then allocate resources. Five full-time employees could each be given 80 hours or 10 days of work based on their FTE. Alternatively, you could use four part-time employees with 0. Over the course of 10 days, 3 FTEs and 5 FTEs worked on the project. You could also complete the project by using 10 full-time workers who would each work 40 hours per week, or five days.
Example 2: Resource budgeting
You are a manager with a 20 FTE budget for the fiscal year. You could hire 20 full-time employees, each with a one-year contract, to fill these positions. 0 FTE. Alternatively, you could hire 40 part-time employees with a 0. 5 FTE, assuming a full-time week of 40 hours, each working 20 hours per week Additionally, you could hire eight part-time workers with 0 FTE and 16 full-time workers (16 FTE). 5 FTE.
Allocating staff resources in a fast-food restaurant is a more complicated example. The majority of your employees are part-time, but not all of them work the same number of hours in many circumstances like this. You might have managers who are 1. 0 FTEs, but a few part-time workers put in 20 hours per week (0 5 FTE), while others only put in 15 hours a week (0 3 FTE).
If your budget for each shift is 5. 0 FTEs, six of the 0 could be scheduled as managers. 3 FTEs and 4 of the 0. 5 FTEs. Alternatively, you could schedule a manager, three of the 0. 3 FTEs and six of the 0. 5 FTEs.
Example 3: Payroll
FTE can also be used to determine an employee’s annual salary, even if they do not work full-time and have not yet completed a full year of service.
For instance, after six months of employment, Joe works 24 hours per week and has earned a total of $15,000. You would divide his salary by 0 to determine his yearly salary. 6 (his FTE: 24 / 40) and multiply by 0. 5 (he has only worked half the year). The formula looks like this:
$15,000 / (0.5 x 0.6) = $50,000
This means Joes salary is $50,000 per year.
Example 4: PTO accrual
Example 5: Staffing analytics
FTE can be helpful for budget analysts when calculating revenue or comparing the business’s headcount to its profits. FTE is especially beneficial if the company has a large number of part-time employees. They can determine how many full-time employees those employee hours represent by converting them into an FTE value. The analytical research they conduct can then be based on that number.
Example 6: Determining eligibility for government programs
The size of a business is frequently used by government programs to determine eligibility for certain programs. In terms of the company’s total FTE, the size of the business can be described.
A government program, for instance, may offer assistance to small businesses, classifying a small business as one with fewer than 30 FTE. A different program might classify companies with more than 50 FTE as large businesses, making them eligible for specific tax exemptions.
Limitations of FTE
While FTE is useful, there are some limitations including:
What do FTE mean?
Full-time equivalent (FTE) is calculated by dividing the employee’s scheduled hours by the employer’s hours for a full-time workweek. Employees who are scheduled to work a 40-hour workweek for an employer are 1 0 FTEs.
What is FTE amount?
FTE stands for full-time equivalent, and businesses use it to determine how many full-time hours have been worked by all of their employees. One FTE is equal to one FTE who works 40 hours per week, while 0 FTE is equal to one FTE who works 20 hours per week. 5 FTE.