To determine whether a company is an Applicable Large Employer (ALE), the ACA says that a company must have an average of 50 or more FTE employees over the course of one year. The ACA considers a full-time employee one who works at least 30 hours per week. The FTE employee doesn’t have to actually exist, and can be a combination of part-time employees. For example, if your entire staff works part-time, the FTE employee is a hypothetical full-time worker by which your part-time workers are measured. A single full-time employee is the baseline of the measurement and has an FTE of 1.0, while a part-time employee working half as many hours has an FTE of 0.5. These values are combined with simple addition, so that three part-time employees working half as many hours as a full-time employee would have a total FTE of 1.5.
- To work out FTE, you must know what’s considered full-time at your company.
- In other cases, you’ll need multiple employees to fill the quota—two part-timers, four employees that only work 10 hours a week, etc.
- A part-time employee who works 20 hours per week would have an FTE of 0.5.
- This tells you how many FTE employees your part-time workers add up to.
- Suppose a company currently has 50 full-time employees on its payroll, along with 10 part-time employees.
In short, it is a crucial term that is important for HR specialists and accountants alike. As you will understand by the end of this article, there are plenty of situations in which knowing the meaning of FTE and how to calculate it can be quite useful. While headcount planning can help HR work with managers and business leaders to build and scale the organization’s workforce, it does have some limitations. Headcount is simple to calculate whether you want to determine the number of people in a particular department or over a set period (monthly, quarterly, annually).
By looking at it on a larger scale, you can get a more accurate picture of how much someone usually works per week. Horizons can support your business by helping you hire full-time employees anywhere in the world. Whether you are looking to expand your business internationally, outsource your operations, or take on more remote staff contact us today to discuss your needs. 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). To calculate FTEs and see if you qualify for tax credit, you can choose one of the said methods (we’ve provided calculators for each).
Full-time equivalent (FTE) is a measurement employers use to standardize their headcount. It combines their part-time workers’ hours to figure out how many full-time employees it would take to work those hours. HR departments often use FTE salaries to determine their part-time workers’ compensation.
What is an FTE employee?
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. Let’s say you have four full-time employees, three part-time employees working 20 hours a week for 30 weeks per year, and one part-time employee working 15 hours a week for 52 weeks per year.
In this case, two part-time workers would count as 1.0 FTE, and four part-time workers would count as 2 FTE. Various combinations can be created depending on the needs of the business. To calculate your FTE when applying for a PPP loan, take the average number of hours worked by employees each week for the covered period, divide by 40, and round to the nearest tenth. For a PPP loan, a full-time employee is considered to work at least 40 hours per week, and no single employee can have an FTE exceeding 1.0. A full-time equivalent employee is a worker with an FTE of 1.0, which will usually mean they’re employed full-time at your company.
This enables HR to categorize employees, analyze, gain valuable insight for business planning and projection, and boost the organization’s efficiency. Let’s say those 35 employees all work 20 hours per fte employee meaning week, while the remaining 165 work 40 hours per week (considered full-time at your organization). For example, headcount reporting might tell you that you have 200 employees in your organization today.
Full Time Equivalent Chart: 40-Hour Work Week
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). Next, divide the above number by the ideal number of work hours for a full-time employee per month. Marija Kojic is a productivity writer who’s always researching about various productivity techniques and time management tips in order to find the best ones to write about. She can often be found testing and writing about apps meant to enhance the workflow of freelancers, remote workers, and regular employees. Appeared in G2 Crowd Learning Hub, The Good Men Project, and Pick the Brain, among other places.
That said, full-time equivalent (FTE) is a metric used to determine the total number of full-time workers that you have in an entire organization. In this article, we’ll teach you everything that you need to know about calculating this metric and why it matters. But when you https://1investing.in/ combine headcount with metrics like these, you can calculate other metrics, including FTE, employee turnover, and retention rates. These metrics help HR understand the development of their workforce and the steps needed to achieve optimal productivity and performance.
How to Calculate Full Time Equivalent (FTE)?
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 step 4, we learned that the total number of work hours for all employees in a single week equals 153. The list should contain the names of your employees as well as the full number of work hours for a single week. Try to include employee leave (both paid and unpaid) in the overall number of work hours to make your results more accurate. A single full-time employee represents an FTE of 1, while part-time employees have a 0.5 FTE (or half that of a full-time worker). It’s used to determine the overall number of full-time hours that your team or business as a whole is able to perform or has performed during a certain period of time.
Altogether, those 18 employees only account for the hours of 4.5 full-time employees. The Fair Labor Standards Act (FLSA) doesn’t define what full-time or part-time employment is for any employer. All the above-mentioned factors end up costing the company something and affecting its bottom line. You can also use an FTE calculation to determine the appropriate pay for part-time workers.
In practice, FTE is measured by companies to estimate the number of full-time employees employed within a specific time frame. Just indicate how many employees work at your company, how many hours they work a week, and for how many weeks. Our model will then instantly calculate the Full Time Equivalent for you. To find the equivalent of a full-time day, divide the total number of hours by 8.
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. 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. To calculate an FTE salary, you must convert an employee salary into a full-time equivalent salary within a full year, regardless of whether the employee has a full-time or a part-time position.
The key difference between headcount vs. FTE is that headcount tells you how many people are currently employed in your organization. Meanwhile, FTE tells you how many full-time hours are being collectively worked. HR departments use FTE to standardize their part-time employees’ working hours and salaries. An FTE 100% is a full-time employee, the one working 40-hour workweeks (also known as an FTE 1.0). Let’s say you have two hires working 40 hours per week, three part-timers each working 20 hours per week, and two people with flexible schedules working an average of 15 hours per week. So you have the equivalent of a bit more than three and a half full-time workers.
Headcount planning is important for Human Resources because it helps ensure they have the right number of people with the right skills to meet the short and long-term needs of the organization. FTE is equally important because it helps HR standardize their headcount, simplify their payroll, and accurately forecast budgets. To calculate FTE, find your employees’ total amount of working hours, divide it by 40 hours, and round up to two decimals. That means that your three part-time workers are equivalent to a little more than one and a half full-time workers. Now, most FTE calculations are going to be made with more than one worker. Let’s start by using weekly hours in order to get a feel for how FTE calculations work.