By regularly reviewing FTE calculations, HR managers can ensure that staffing levels align with company goals and legal obligations. This can help optimise labour costs, enhance productivity and support overall business success. FTE is a unit of measurement that represents the equivalent number of full-time employees needed to perform the same amount of work.
Step 4: Discover the Total Number of Work Hours per Week
Stay on top of FTE trends and leverage HRIS tools to master this essential workforce metric. Sudden changes or churn in FTE numbers can serve as an early warning for HR of underlying staffing problems or challenges. When tallying up hours worked, things like paid time off (PTO) and sick leave are included. However, external contractors and freelancers are generally not included in the FTE count.
There are companies that have a significant number of people working part-time, i.e., workers who spend only a short time in the company. No, people who own the organization or company cannot be counted in the FTE and average annual wage calculation. One of the most common yet often perplexing compliance concerns HR teams encounter is calculating FTE, or full-time equivalency.
The FTE metric plays a pivotal role in financial planning by offering a clear view of the labor force in terms of full-time units. This perspective allows for a more accurate budgeting process, as labor costs are often the most significant expense for organizations. Overall, FTE is an important metric to consider when looking at BPO providers. It is a measure of the productivity of an individual or team and can be used to compare the performance of different providers. Additionally, understanding the cost per FTE of a given fte full form in company provider can help determine the cost-effectiveness of the provider. By understanding FTE, businesses can make informed decisions when selecting a BPO provider and ensure that they are getting the best value for their money.
Managing employees, time tracking, overtime, and time-off data in disparate systems is complicated. Join us on this webinar case-study to see how Vimeo was able to leverage the BambooHR and Boomr integration to simplify their workforce management and streamline their processes. However, many employers have experimented with a 4-day workweek in recent years.
Full-time equivalent
As such, organizations rely on FTEs to make informed decisions regarding strategic resource allocation and finances. Full Time Equivalent is frequently used to assess an employee’s workload and its contribution to a project, or to track cost savings in a company. The definition of Full Time Equivalent in salary is necessary for accounting, as well as calculating the company’s costs while compensating its employees.
Step #3: Calculate the total annual work hours
Generally, a full-time employee works a minimum of 35 hours or more per week. This is the most common definition of full-time but can vary depending on the organisation. For example, some organisations may define full-time as working 32 hours or more a week.
An FTE of 100% is equal to the amount of work one full-time employee performs within a given time period (a day, week, month, or year). Based on the FTE value, some of your employees could be eligible for minimum or affordable healthcare insurance. Under ACA, any employee that works at least 30 hours per week, or 130 on a monthly basis, is entitled to some form of healthcare. To calculate your yearly FTE, you should calculate the work hours of all of your employees for that one year and divide that number by the ideal number of work hours per year for one full-time employee.
- In other words, FTE allows companies to standardize headcount and measure workload capacity by converting part-time staff to a full-time basis.
- However, bear in mind that this only applies to positions that work 30 hours per week when assigned a 0.75 FTE position, i.e., the IRS minimum for a full-time definition.
- For example, businesses may need to provide certain benefits to employees depending on their FTE.
- FTE also provides a standardised measure for comparing staffing levels across different departments and organisations.
- As easy as that, Clockify can be your ally in estimating your employee FTE for your specific needs.
For example, if an employee works 40 hours in a week but is expected to work 40 hours in two weeks, the FTE hours would be 0.5. Using the same formula, the number of part-time hours worked amounts to 5,000 hours per year. The chart below displays the number of weekly hours worked with the corresponding FTE under the standard 40 work-week.
The calculator will then tell whether you are an Applicable Large Employer or not. For instance, in terms of business, calculating FTEs can be useful in determining how many hours part-time employees should work to equal the number of hours full-time employees work. Such calculations facilitate accounting processes such as estimating wages, payroll, costs, etc. The number of hours an employee completes in a workweek can vary by organization, but the math used to calculate FTEs is the same regardless.
- This way, you will be able to determine the number of full-time equivalent workers in your company even when you have part-time workers on-site.
- For example, if a business is looking to hire a new employee, it may look at the FTE of the existing employees and compare it to the FTE of the new employee.
- This is the most common definition of full-time but can vary depending on the organisation.
- 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.
- This metric offers a standardized way to measure employee contributions, regardless of their employment status or irrespective of an employee’s scheduled hours.
- In step 4, we learned that the total number of work hours for all employees in a single week equals 153.
With FTE, you can get a clearer picture of how your employees are performing in their jobs. There are numerous reasons why calculating FTE can prove meaningful to your company. By calculating your FTE, you’ll be able to get information on the overall productivity of all your employees (within a team, department, or entire company). It can refer to either one person’s work calculating full-time or numerous people doing the functions of one full-time employee. To convert an employee’s full-time equivalency into standard hours, multiply their FTE rate by 40.
By aligning development initiatives with FTE insights, organizations can ensure that their workforce remains agile, skilled, and fully equipped to meet the challenges and opportunities of the future. Declining FTE percentages may indicate problems retaining full-time staff. HR can analyze FTE ratios to ensure the workforce alignment supports desired cultural goals. Many laws and regulations related to benefits eligibility, overtime pay, and other workforce standards depend on whether an employee is classified as full-time or part-time based on FTE status. FTEs can be compared to revenue output and other productivity metrics to assess workload balance across the organization.
Rinaily is a renowned expert in the field of human resources with years of industry experience. With a passion for writing high-quality HR content, Rinaily brings a unique perspective to the challenges and opportunities of the modern workplace. As an experienced HR professional and content writer, She has contributed to leading publications in the field of HR.