What Is Full-Time Equivalent FTE? G-P
Employers can use FTE to guide their hiring strategy and plan for a project, while governments often use the metric to determine program eligibility. For example, a project that is estimated to take 600 hours of work can be accomplished in a variety of ways depending on your allocation of staff and time requirements.
Let’s say you need to calculate the total amount of hours, time, and money required for your business to run successfully. It could require 15 full-time employees (600 hours/40 hours) five days to complete, 30 part-time employees five days to complete, one full-time employee 15 weeks to complete, or a combination of these. For example, if an organization’s FTE is 40 hours per week, it would require two part-time workers to fulfill the same hour requirements as one worker working 40 hours over five days. To calculate FTE correctly, you’ll need to quantify your total weekly available work hours; it’s an important component of the calculation. Available hours per week is the number of hours your business considers standard work time multiplied by the number of employees you require to accomplish those related needs.
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An FTE employee is not necessarily a single employee; it may be a combination of several part-time employees who, when their hours are added together, create a full-time equivalent, or FTE, employee. A project manager estimates that a major deliverable will take 50 hours to complete.
FTE can standardize wages by demonstrating the equivalent salary of part-time agents based on working full-time. https://www.bookstime.com/ For part-time workers, determining the pro-rata is by changing their working hours with the help of FTE.
FTE in Finance Meaning
This measurement method is often used when deciding how much to pay employees per their wages or salary. The full-time equivalent measure can also be applied to a student’s classes. For example, if the establishment requires 30-hour classwork per week and the student only completes 15, this will account for 0.5 FTE. There are 8 working hours in the day on Monday, and the DEF Company staff works 136 hours during that day. When 8 working hours are divided into 136 hours, the result is 17 FTEs.
- Human resources often use the FTE metric to make staffing decisions for the entire company.
- Add the hours worked by full-time and part-time employees together, then divide that number by the total hours worked by full-time employees to determine the FTE for that particular period.
- If the trucks open at the same time, then you require two different people to run them.
- Full-Time Equivalent is a tool to use when calculating the costs of a project or forecasting employee hours and salaries.
- Whether an employer is an ALE under the shared responsibility provisions will depend on the size of the organization.
When calculating your FTEs for basic accounting or business purposes, the simplest way to do it is to divide total annual work hours for all employees by an average full-time annual work schedule. Full-time equivalents is a metric that measures the total number of full-time employees you have based on hours worked rather than the exact number of employees. Each part-time employee counts as a fraction of one FTE based on how many hours they work on average.
Step 4: Separate the part-time hours
Annual and sick leave and compensatory time off are included in the hours worked for the purposes of defining an FTE. However, when filling positions, these factors are excluded from calculating worked hours. Consequently, if the same college employs six fte meaning lecturers who work 10 hours per week, and based on a 40-hour full-time week, the college would have 1.5 FTEs. Depending on the country, teachers could work different hours, but usually, they will be between 30 and 40 hours, with overtime if required.
A full-time employee is equivalent to an FTE of 1.0, while an individual with half the workload makes up an FTE of 0.5. FTE refers to one full-time employee or the equivalent of a full-time employee. To qualify for PPP loan forgiveness an organization must have maintained the same level of FTE employees during certain specified time periods following the loan disbursement. Read our employer’s guide to find out more about different types of insurance you can offer your employees. Calculating FTEs will also determine an employer’s duties under the shared responsibility provisions of the Affordable Care Act. Read our employer’s guide to find out more about how to hire employees in Europe, Asia, Africa, or elsewhere.
Calculating FTEs for Large Employers Under the ACA
The exact number will depend on the country where the employment is occurring, since the number of holidays varies by country. Thus, the number of full-time employees working full eight hours is 62.5. This is how a company, on average, calculates the average yearly number of hours that a full-time employee works. When it comes to running a successful business, you always want to be as efficient as possible and cut costs wherever you can. Calculating your FTE highlights areas for improvement when it comes to project needs or employee hours.
- If you’re trying to determine whether or not you’re an ALE in the United States, you should use the IRS’s minimum of a 30-hour work week in your calculation.
- Keep reading to find out everything you need to know about calculating FTEs and how to use them.
- You can use the FTE total each week, month, or year to determine company growth.
- While there is still drawbacks to this practice, it is safe to say that its advantages outweigh its risks.
- A full-time worker is generally in a more advantageous position when compared to a fixed-term contractor.
- Available hours per week is the number of hours your business considers standard work time multiplied by the number of employees you require to accomplish those related needs.
You’re left with 31.3 which is equal to how many full-time employees you would need to fulfill those 250 hours of project time. Once you have a list of employees, you’ll need to determine how many hours each employee works each week.
FTE: Financial Transaction Executive
Because many government agencies use FTEs when determining eligibility for certain programs, it’s important that you or your benefit administrator calculate your full-time equivalent employees properly. The number of FTEs your business has can also affect your business taxes, since many programs provide tax deductions based on the number of FTEs your business employs. Denying benefits to part-time employees who work in the same range and hours as your full-time staff can have consequences depending on your local laws.