In summary, understanding the meaning of FTEs is a key competency for HR professionals today. 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. FTE is calculated by adding up the total number of hours worked by all employees and dividing that total by the number of hours in a full-time work week, which is typically 40 hours. By calculating the FTE, you can easily see how much you spend on salary and other personnel costs.
The labor market is changing rapidly due to flexible work, working from home and technological innovations. Here, we discuss the impact of these changes and the role of technology in FTE tracking and analysis. In this blog, we explain what FTE (Full-Time Equivalent) is and why it’s important for your organization.
Workforce Demand Forecasting
There are some exceptions when calculating FTE for the purposes of the small business tax credit. One FTE equals 2,080 hours per year and the total number of employees is taken into account rather than the number of hours they have worked. Certain employees are not included in the calculation such as owners, partners, shareholders, family members or relatives, and seasonal workers who work fewer than 120 hours per year. Full-time equivalents (FTEs) 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.
- If you’re replacing full-timers with part-timers for the same number of hours worked, consider the costs of training and managing extra people.
- This measurement is often used in human resources to calculate various aspects of workforce planning, budgeting, and analysis.
- Here are the key points and an action plan for successful FTE management.
- Now, if you would like to calculate FTEs company-wise, make sure you adhere to the following steps below.
- These projects often involve managing diverse teams and long-term resource needs, making it crucial to standardize work measurement.
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. Headcount is the total number of employees, while FTE is the equivalent number of full-time employees needed to perform the same amount of work. FTE takes into account the hours worked by part-time and contract employees, providing a more accurate representation of the organisation’s labour costs and workload distribution.
- For example, if one part-time employee works 20 hours per week and another works 30 hours per week, their combined hours would equal 50.
- Still, in this case, it’s more reasonable to take some bigger periods, let’s say, 90-day or 120-day periods, during which you can take the average number of hours spent by part-time employees.
- For example, a company can use FTE to compare the staffing levels of its full-time, part-time, and contract employees, ensuring that the workforce is adequately sized and aligned with business objectives.
- Ioana holds a BSc in Business Management from King’s College London and has worked for 4+ years as a management consultant in the industries of technology, media and telecoms.
Hour Work Week Full Time Equivalent Chart
The Paycheck Protection Program (PPP) is designed to prevent job losses during the pandemic by giving loans to small businesses to cover payroll expenses and other costs. A portion of this loan can be forgiven based on the number of FTE workers an employer has on its payroll. More importantly, many government support programs use FTE as a basis to decide how your company should be treated. And some state and federal employment laws only apply to companies who meet a certain threshold of FTE employees. We’ll assume that where you are, full-time employment means working 8 hours a day, 5 days a week, for 52 weeks a year. Benefits like paid time off and maternity/paternity leave are all included within the number of hours worked, so don’t worry about accounting for these hours.
In any case, they will end up with accurate data on the total number of hours their employees worked. It can be difficult to calculate FTE if you don’t have a systematic way of monitoring the number of hours your employees work per week. You may use the traditional Bundy clock or ask your workers to maintain a spreadsheet for attendance. Your HR personnel may have to manually calculate total billable hours per month and may end up making mistakes. Employers often have questions about the differences between employee status, such as full-time, part-time, and full-time-equivalent employees, and how employment laws apply to these workers. Below we answer frequently asked questions about full-time, part-time, and full-time-equivalent employees.
No stranger to IT and enthusiastic hackathoner, Ioana is also an accomplished fintech, SaaS and B2B tech writer. Whether you are a professional looking for career growth, an employer looking to attract and retain the best talent, or an educational institution looking to prepare students for tomorrow’s challenges,… The development interview is an important means of encouraging employee growth and development within an organization.
Q: If I offer vacation to full-time employees, must I do the same for part-time employees?
While this calculator provides a basic understanding, for more comprehensive insights into your workforce, consider utilizing our Insights Feature. 0.75 fte meaning With this feature, you can delve deeper into FTE ratios, analyze labor costs, and make informed decisions about benefits and PTO accrual policies. On the dashboard, managers can create individual or team reports on billable hours.
The formula itself involves dividing the total hours worked by part-time and full-time employees by the number of available full-time hours in a year, which is typically considered to be 2,080. This standard figure represents the total number of hours that a full-time employee would work in a year based on a traditional 40-hour workweek. The FTE formula is a tool used by HR professionals and business owners to calculate the full-time equivalent of part-time and full-time employees on an annual basis. This formula is especially useful when it comes to workforce planning, budgeting, and understanding the overall efficiency of a company’s workforce. To illustrate the FTE calculation, let’s consider a scenario where a company has 50 full-time employees working 40 hours per week and 2 part-time employees working 20 hours per week. FTE is a measurement unit for the total hours worked that equates to the number of full-time employees of a company within a fiscal year.
In today’s dynamic business landscape, the full-time equivalent (FTE) model is crucial in optimizing workforce management, enabling accurate resource forecasting, and maintaining cost control. By following the steps to calculate FTE effectively, businesses can better understand resource capacity, enhance productivity, minimize overheads, and drive profitability. To accurately calculate FTE, it is imperative to sum up the actual hours worked by all employees within the specified period. Accurately tracking these hours provides a comprehensive view of the workforce’s total effort. FTE 100% refers to a measure of employment that represents a full-time equivalent.
Step #4: Add the total annual work hours (for both part-time and full-time workers)
This section outlines how to modify employee status in Workday and update workload and FTE values as needed. Analyzing FTE data in Workday facilitates workforce planning, reporting, and analytics. Now, let’s understand how to calculate FTE for various types of employees in detail. This ensures that the FTE value is accurate and practical for reporting and decision-making purposes. As we’ve explored the benefits, let’s move on to the next section to learn how to calculate FTE effectively. Though convenient for subscription businesses, recurring billing comes at a cost.
50 FTE refers to an individual working a 20-hour work week and is equivalent to half of a full-time employee (1.0 FTE) who works a 40-hour work week. Two part-time employees together equal one full-time employee equivalent (0.5 + 0.5). At 0.8 FTE, an employee is working fewer hours than a full-time employee who works 40 hours per week, as an FTE of 80% would be equal to 32 hours.
What does FTE mean in business?
This change can be initiated by utilizing the Change Job business process. Examining FTE data allows organizations to spot patterns and trends, allocate resources more efficiently, and make decisions about staffing and resource allocation based on data. Accurate calculation of FTE empowers organizations to manage their workforce effectively and make informed decisions regarding resource allocation and planning.
Declining FTE percentages may indicate problems retaining full-time staff. HR can analyze FTE ratios to ensure the workforce alignment supports desired cultural goals. 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.
