These rates will depend on the PTO accrual rate policies of a company, organization, or institution. However, bear in mind that this only applies to positions that work 30 hours per week when assigned a 0.75 FTE position, i.e., the IRS minimum for a full-time definition. In contrast, non-exempt positions who typically work only 28 hours per week on a 0.75 FTE schedule do not qualify, even if the employer policy defines them as full-time.
The total hours worked is the sum of the number of hours worked by part-time and full-time employees, whereas the number of available full-time hours in a year is most frequently 2,080. FTE, an abbreviation for “full time equivalent”, counts the approximate number of full-time employees employed by a specific company, but with the inclusion of part-time employees. Rather than hiring new employees, businesses can use FTE to deploy staff across various departments thereby keeping costs down.
All you need to do is enter how many hours of work are required to complete the whole project (estimated time), and then how many hours a day your employees will work on that specific project. They also use it to calculate labor costs for the expected project workload and subsequently define the funds needed to finish a project. A full-time position would equate to around 30 to 40 hours per week for most employers. If a company considers 40 hours per week as the basis for a full-time position, then anyone working an amount of hours below this range is considered a part-time employee. The same logic is applied if a company considers 30 hours per week as the standard for a full-time position. 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.
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. All the above-mentioned factors end up costing the company something and affecting its bottom line. 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. The definition of Full Time Equivalent could be stated at it’s a unit of measurement that represents an employee’s work hours on a weekly full-time basis.
Full-Time Equivalent (FTE) Explained
It’s the most common unit of measure used when calculating staffing levels for projects or teams. In project management, a full-time equivalent (FTE) is a unit of measurement that allows you to match personnel with projects. An FTE salary is an employee salary converted into a full-time equivalent salary within a full year, regardless of whether the said employee holds a full-time or part-time position.
Depending on the type of work that is required, management can decide the number of full-time employees that are needed for a particular project and assign employees to those positions accordingly. The FTE is calculated by taking into account the number of hours worked in a full-time weekly schedule and the actual number of hours employees work. Now determine the number of hours worked by full-time employees over a given period. Full-time employees are those who work a minimum of 30 and a maximum of 40 hours a week and more than 120 days a year. Full-time equivalent, or FTE, measures the total amount of full-time employees working at any one organisation. It is a way of adding up the hours of full-time, part-time and various other types of employees into measurable ‘full-time’ units.
Read our employer’s guide to find out more about how to hire employees in Europe, Asia, Africa, or elsewhere. In this article, we will explore the meaning of FTE from a U.S. perspective, how it is calculated and the purposes of doing so as an employer. An explanation of how FTE is calculated and the various ways in which a business can use this metric when forecasting and budgeting. The full-time equivalent is an indicator that answers many of the questions Human Resources departments need answers to. This, therefore allows them to make better decisions regarding personnel management. Understanding your FTE can be very beneficial for project success, but if you consistently get it wrong it can lead to project miscalculations and delays.
Five of them work full-time (40 hours per week), three occupy a part-time position each working 20 hours a week, and the other two each work 10 hours per week. The full-time equivalent converts the hours worked by part-time employees into hours worked by full-time employees. You can work out the Full-Time Equivalent by dividing an employee’s scheduled hours by the employer’s hours for a full-time workweek.
This is a straightforward example since each employee who works 40 hours per week in your company has a 1.0 FTE. The Full Time Equivalent (FTE) represents a unit of measurement standardized to equal the number of hours worked by the typical full-time employee. This is particularly true for large organizations that employ a variety of full-time, part-time, and flexible staff. Now add the total number of hours worked by full-time employees to that of part-time employees to get the total number of hours for all employees.
We’ll also show you how to perform various calculations that involve FTEs, and provide you with automatic calculators that will help make the process easier. The chart below displays the number of weekly hours worked with the corresponding FTE under the standard 40 work-week. Employers can use FTE to evaluate their hiring capacity and current payroll, as well as for reporting purposes related to labor laws and employee benefit programs. If you’re offering health coverage to remote workers, there may be some additional considerations.
The full time equivalent, often abbreviated as FTE is an indicator that reflects an employee’s productive capacity. An FTE of 1.0, for example, corresponds to the hours worked in a day for a full-time employee. Consequently, the FTE for a part-time employee working 20 hours a week would be 0.5. Daniel, Nicole and Bobby do not work a full 40 hours a week, and to calculate the Full-Time Equivalent of the hours they work, you must divide each employee’s working hours by the company’s hours for a full-time workweek. Calculate the FTEs by determining the number of hours worked by full-time or part-time employees in a year. To do this, multiply the number of weeks in a year with the number of hours for a full-time position.
Agile Capacity Planning 101: Theory + Tools
If your company considers the number of hours for a full-time position as 40 hours per week, note that working 30 or more hours counts as 1 FTE for purposes of ACA compliance. 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. 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.
Instead, it focuses on the number of people working on your projects, whether they are full time employees, part time employees, contractors, interns, students, freelancers, advisors, etc. Full-time equivalent (FTE) is calculated by dividing an employee’s scheduled hours by the company’s work scheduled hours on a weekly full-time basis. 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). If you, for instance, choose the first method, enter all the actual hours worked (including PTO) and divide that number with 2,080 to get the final FTE. If an organization considers full-time to be a 40-hour working week then one full-time employee will count as 100% FTE.
Add annual hours worked for full-time employees and part-time employees
These calculations are used to clarify the company’s obligations regarding employee health benefits. As evident, once you have the total number of hours per day, you’ll be able to pick whatever days/employees ratio you want to carry out the estimated workload. The actual PTO an employee can accrue may depend on several factors, including years of employment that dictate an employee’s hourly PTO accrual rate.
The underlying period can be, for example, a day, a month or even a year. Being a basic criterion in staff controlling, it is one of the most important staff indicators for companies. Particularly due to the development in the part-time sector, your staff planning will be more comprehensible and controllable with this ratio. 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. To help you determine if you qualify for an Applicable Large Employer, visit this website. Cassie is a deputy editor, collaborating with teams around the world while living in the beautiful hills of Kentucky.
- However, it will be up to you to decide how many people you’ll want to employ to carry this out and what type of employment you will offer them.
- FTE can serve as a parameter for your decision-making as a manager regarding promotions, dismissals, division of tasks, training and talent development.
- The value of knowing your FTE depends on whether you’re looking for something specific in your business or organization.
- Full-time equivalent students[8] is one of the key metrics for measuring enrollment in colleges and universities.
- In short, it is a crucial term that is important for HR specialists and accountants alike.
However, it will be up to you to decide how many people you’ll want to employ to carry this out and what type of employment you will offer them. To calculate the number of hours your employee is expected to work based on their FTE, you’ll need to reverse the previously mentioned process of calculating FTE based on the number of hours worked. For example, you may want to do this when you want to make an FTE offer to a new employee during a job interview. And the actual number of hours attached to an FTE will also depend on your organization’s policy. The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours.
As you can see, the part-time employees are converted into the performance of a full-time employee. So the FTE is not the number of employees in a company, but the equivalent of a full-time employee. Because the number of employees says nothing about a company’s actual work performance. One part-time employee who works ten hours per week and one part-time employee who works 25 hours per week. To calculate the total FTE, add the number of FTEs worked by full-time employees (1 FTE for each full-time worker) to the part-time FTE you calculated in step five. 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.
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. For example, if an employer considers 40 hours per week as full-time, employees who work 40 hours each per week count as 1.0 FTE, while those that work 20 hours per week, or part-time, make 0.5 FTE. 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.
Using this system, you can quickly calculate how many people are needed for a project that requires X amount of labor hours — just divide the total hours by each person’s FTE and you’ll see how many people are needed overall. Full Time Equivalent is frequently used to assess an employee’s workload and its contribution to a project, or to track cost savings in a company. The definition of Full Time Equivalent in salary is necessary for accounting, as well as calculating the company’s costs while compensating its employees. If a company has work schedule of 40 hours a week, the employees expected to work 40 hours per week are 1.0 Full Time Equivalents. In the context of the Health Care Reform Act, the Affordable Health Care Act requires the calculations that determine whether a business is classified as owned by a large employer or a small business.
The actual workload is not taken into consideration for this calculation. According to OECD statistics on average weekly hours worked on the main job from 2021, Denmark has an average of 33.7 hours per week compared to Columbia and its average of 47.8 hours during a workweek. The US falls somewhere in the middle when compared to other countries, with 38.8 hours of work time per week, on average. In practice, FTE is measured by companies to estimate the number of full-time employees employed within a specific time frame. Horizons can support your business by helping you hire full-time employees anywhere in the world.