What Is Full-Time Equivalent FTE and How to Calculate It?

Posted April 8, 2024

We’ll show you how to calculate FTE, taking into account flexible working hours and working from home. Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy. Yearly, a company generally considers an FTE to be valued at 2,080 hours. To delve further into the matter, let’s look at how FTEs are calculated. Stay on top of FTE trends and leverage HRIS tools to master this essential workforce metric.

For example, the UK’s National Insurance Contributions (NICs) are calculated based on an employee’s weekly earnings. 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. FTE is the number of determined full-time positions in an organisation. Let’s have a practical example to help you master the full time equivalent calculation. Support your company’s growth and expansion by utilizing the Compensation Software.

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Many HRIS softwares can automate FTE calculations by incorporating data on employee hours worked, absences, time-off calendars, and more. In other words, FTE allows companies to standardize headcount and measure workload capacity by converting part-time staff to a full-time basis. Using these metrics, the company can then ensure that it has the right number of employees in place to meet customer demand, avoid inefficiencies, and optimise labour costs during peak periods. Three of them work full-time (40 hours per week respectively) and the rest work 10 and 5 hours in total. The FTE represents the total number of employees working full time hours worked in a company. Compensation Software utilizes global market data to help your company effectively forecast labor costs.

In our example, the company gives all its workers the same four weeks off, but employees may have different benefits packages in some companies, which may change the FTE calculations.
A part-time workforce might save you money in wages and benefits but could, in turn, cost more in rehiring and training.
However, external contractors and freelancers are generally not included in the FTE count.
This method of calculation is a common way of creating an accurate forecast.
You can calculate FTE to determine how much a project will cost in terms of time and personnel needs.

Data Accuracy and Integrity

If an employee’s weekly earnings are above the primary threshold but below the secondary threshold, they will pay Class 1 NICs at a rate of 12.5%. FTE provides a standardized way to compare employees of different statuses. While often used interchangeably, FTE and headcount represent different aspects of a workforce. Finally, let’s see how FTE relates to employment status, along with some legal and compliance considerations. The development interview is an important means of encouraging employee growth and development within an organization. Because topics such as sustainable employability and binding and engaging talent are currently central to HR, conducting effective development…

Use the formula

(They may opt to give their employees a generous raise or some extra time off). Each company determines how many hours they consider full-time, calculating the number of hours worked each week by the number of workweeks a year. For example, a company might consider 40 hours a week, 52 weeks a year, as full-time. If an employee works 40 hours a week, they count as one full-time employee or 1.0 FTE. By calculating the FTE, you can easily see how much you spend on salary and other personnel costs. This makes it possible to plan and manage your budget more accurately, and to identify cost savings by looking at the ratio between hours worked and costs.

Is FTE different from headcount?

By strategically managing FTE, you improve the efficiency and effectiveness of your personnel management.
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.
FTE provides a standardised way to measure workforce size, allocate resources effectively, and manage workload distribution.
Cassie is a former deputy editor who collaborated with teams around the world while living in the beautiful hills of Kentucky.

A full-time equivalent (FTE) is a unit of measurement used to figure out the number of full-time hours worked by all employees in a business. If your business considers 40 hours to be a full-time workweek, then an employee working 40 hours per week would have an FTE of 1.0. In contrast, a part-time employee working only 20 hours per week would have an FTE of 0.5—which shows that their hours worked are equivalent to half of a full-time employee.

FTE for Budgeting, Project Management, and Workload Distribution

Khyati Sagar is a seasoned HR and payroll expert with over a decade of experience in the field. She has worked with businesses of all sizes, from small startups to large corporations, helping them optimize their HR and payroll fte full form in company processes. As a passionate advocate for technology-driven solutions, she is always on the lookout for the latest advancements in HR and payroll software. When she’s not working, you can find her hiking or playing basketball with her friends and family. This way, you ensure fairness and consistency in payroll, proportional to the hours worked by part-time staff.

How do you calculate an FTE?

While a standard full-time workweek is typically 40 hours, some companies or countries may have different definitions (e.g., 35 or 37.5 hours per week). Knowing the exact full-time workweek for your business is crucial to accurately calculate FTE. Businesses may find it difficult to determine the salary of part-time workers, especially when they work only a few days a week.

By knowing how much FTE you need, you can efficiently create schedules and schedule employees at the right times. To identify the FTE for part-time positions, divide the total number of part-time hours worked by the number of hours worked by one full-time worker. In our example, we will divide the total hours worked by Employees D and E by the number of hours worked by Employees A.

Include all employees, whether full-time, part-time, temporary, or seasonal, to ensure a comprehensive FTE calculation. By adhering to these calculations, businesses can avoid substantial fines and ensure they are meeting their legal obligations to offer health insurance coverage to eligible employees. ACA compliance is closely linked to FTE calculations, as the Affordable Care Act (ACA) mandates specific requirements for businesses based on their number of Full-Time Equivalents (FTEs). Under the ACA, companies with 50 or more FTEs are required to provide health insurance to their employees or face potential penalties. Determining FTE helps businesses manage their labor costs more effectively by aligning payroll expenses with the budget.

Using the FTE calculations, a company can clearly see how much the employee works in comparison to a full-time employee. A full-time equivalent (FTE) is a unit of measurement used to determine the amount of full-time hours worked by all employees in an organization. If a normal work week consists of 40 hours, an employee who works for 40 hours per week has an FTE of 1.0 while a part-time employee working only 20 hours per week has an FTE of 0.5.

The list should include the employee’s name and the number of hours they work per week. Full Time Equivalent (FTE) refers to the unit of measurement equivalent to an individual – worker or student – one unit of a work or school day, applicable in a variety of contexts. In most cases, full time equivalents measure an employee or student and/or their workload. 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). 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. However, several organizations calculate the FTE weekly for the number of hours worked and the FTE week.

By standardizing the number of hours worked and comparing them to a full-time work week, FTE provides valuable insights essential for effective business management. By understanding FTE and how it is calculated, organizations can optimize their human resource management and enhance their competitiveness in a dynamic business environment. By determining your company’s FTE you get a better understanding of how effective and useful your workers are. Part-time workers are usually paid less than full-time employees and may not have access to the same benefits.

For example, if a full-time job is 40 hours per week, and you have only two employees working 20 hours per week, your company has a 1.0 FTE. 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.

This regulation ensures that larger employers contribute to their employees’ healthcare coverage, thereby supporting overall employee well-being. It supports financial planning by providing a clearer picture of how labor expenses fit into the overall budget, leading to more controlled and efficient spending. FTE plays a huge role in resource planning for companies across various industries.