In addition, it enables project managers to execute accurate planning, allocate and distribute resources, and manage staff capacity. The calculation of FTE salary for part-time employees based on the above example will represent the FTE hours divided by the salary they earn. The hours worked per day, week, or month are compared to what these same units are for full-time employment, and the subsequent calculations reflect them. Additionally, FTE calculations give you a better sense of your current staffing levels so that you can plan and budget accordingly. Using time tracking software, like Homebase, will allow you to run a historical report based on employee work history and status to gather the average hours worked using custom fields. In addition, Homebase provides small business employers with a range of scheduling options to ensure your staff hours are within the correct range.

• Bear in mind that these are just simple FTE example calculations — project managers approach FTE from a different angle while federal programs use different FTE calculation methods.
• Our goal is to present a thorough understanding of FTEs and highlight how they shape the path toward business success.
• FTE is an important measure for companies as it helps them estimate the resources they need, both in terms of workforce and time, to complete a project.
• Full-timers often identify more closely with company mission and values.
• Analyze your upcoming projects/seasons to determine how many FT hours you’ll need to ensure successful completion.
• It can be helpful in cases where companies employ both full-time and part-time employees.

But, in many situations, a business needs to view or report its staffing level in terms of full-time work. Knowing your number of FTEs is important for assessing business performance, and it’s required under the Affordable Healthcare Act (ACA) and for certain tax credits. The method for calculating FTE is slightly different for each of these uses.

Importance of FTE

In this article, we’ll teach you everything that you need to know about calculating this metric and why it matters. For example, the Affordable Care Act in the United States requires applicable large employers to provide health insurance to employees working an average of 30+ hours (0.75 FTE). Add your team’s billable rates to forecast project costs, and track actual hours worked to monitor budget spend. Moreover, having accurate FTEs fte meaning finance for all employees will also help employers determine responsibilities towards them, their PTO rates, and whether the business is eligible for certain federal programs. Once you decide why you want to use FTE, identify the appropriate calculation method, and follow it through. The calculation is straightforward — enter the number of full-time employees together with the total number of hours worked by part-time employees per week.

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. 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. Your FTE number is also an important factor in determining if you’re considered an applicable large employer. An applicable large employer means that you have 50 or more full-time employees or a combination of full- and part-time with a total FTE of 50. FTE refers to calculating the number of hours instead of the number of employees to forecast costs based on a full-time workweek.

Step 4. Add annual hours worked for full-time employees and part-time employees

Our goal is to present a thorough understanding of FTEs and highlight how they shape the path toward business success. Let’s jump in and decode the world of FTEs and their powerful influence on businesses. 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. If so, confirm you’re offering the right level of health insurance to your team to prevent a tax penalty. Clockify is a time tracker and timesheet app that lets you track work hours across projects. Within this method, the employee is credited with 40 hours for each week when payment was due (including PTO).

This will depend on your industry and the type of projects you embark on. By knowing how many full-time equivalents you have, you can see where your organization has room for growth. One option is to bring on a part-time employee on a full-time basis temporarily. Let’s review what FTE means, why it’s essential, and how to use it for resource management.

Why is it important to calculate the FTEs?

A full-time employee can be defined by a 40-hour workweek, 8-hours per day, 5 days per week. Once companies specify the full-time hours, they can use it to calculate the full-time equivalent. This process requires establishing the hours every employee is scheduled to work. Subsequently, companies must divide the actual scheduled hours by the number of full-time hours. If each of these workers works 40 hours per week, then you are already meeting the FTE requirement.

• In other words, do you know what the full time equivalent is and how it can help you better understand the needs of your organization?
• With 14 employees, 7 of which are full-time and 7 part-time, the staffing capacity is 9.04 full-time employees per year.
• Since both are considered to be full-time schedules in their respective companies, both count as a 100% or 1.0 FTE.
• If you’re concerned about staying compliant, consider software such as Homebase that will track your employee hours, provide reporting, and can also prepare your time sheets for payroll.
• Fortunately, some tools and techniques help businesses accurately compute and monitor their FTEs – simplifying this critical process.
• By knowing how many full-time equivalents you have, you can see where your organization has room for growth.
• Yearly, a company generally considers an FTE to be valued at 2,080 hours.

The expected length of a full-time schedule has changed a lot throughout history — full-time employees now work about 20 or 30 hours per week less than they did in the 19th century. The calculation is straightforward — divide the employee’s scheduled hours by the number of hours that represent an official weekly full-time schedule in a company (e.g., 40 hours per week). 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. Along with counting the hours worked, FTEs show how many full-time employees a particular company employs within a fiscal year or needs to employ to carry out a project. The Paycheck Protection Program (PPP) is a Small Business Administration (SBA) program to help employers retain employees during the public health and economic crisis. The number of full-time equivalent employees is used to determine the amount of loan forgiveness for borrowers.

Checking an employee’s FTE with Clockify

Part-time workers are usually paid less than full-time employees and may not have access to the same benefits. Project management can be a hassle when using both full-time and part-time employees. For that reason, companies may need to calculate the full-time equivalent. It allows companies to determine the number of full-time employees they employ. An FTE is a measure of how many employees are equivalent to a full-time worker.

In practice, FTE is measured by companies to estimate the number of full-time employees employed within a specific time frame. The Full Time Equivalent (FTE) represents a unit of measurement standardized to equal the number of hours https://www.bookstime.com/ worked by the typical full-time employee. This method of calculation is a common way of creating an accurate forecast. Human Resources departments often use FTE to figure out how to set the working hours and salaries of employees.

Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective”), an SEC-registered investment adviser. Bear in mind that this is just the expected number of hours Olivia may work with a 0.7 FTE — she will likely use some of these hours for PTO. FTEs in government agencies aren’t necessarily capped; however, the manager must justify the number of FTEs, and it needs to be compliant with regulation and budget requirements.

However, if one works only 20 hours per week, you must bring in another part-time worker to complete the FTE requirement. For example, you could use it to calculate the staff you need to cover a certain number of hours or to compare the cost of part-time and full-time employees. Next, you need to divide the total hours worked by all employees (1150) by the number of hours in a full-time work week (40).

How to Calculate Full Time Equivalent (FTE)?

Employee productivity can be measured to determine how much each full-time equivalent generates for the business. On the flip side, a spike in FTE levels without corresponding business growth may indicate a need to realign staffing plans and reduce hours. In other words, FTE allows companies to standardize headcount and measure workload capacity by converting part-time staff to a full-time basis. While the Full-Time Equivalent (FTE) metric offers invaluable insights into workforce dynamics and assists in strategic decision-making, it has limitations.