What is Full Time Equivalent (FTE)?
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, 1.0 is typically the FTE representation of an individual’s full work/school day, while 0.5 would indicate half of the original figure, generally in reference to the workday. In reference to an individual, 0.5 usually refers to the fact that the worker renders less than a full day of work or the student attends less than a full day of classes.
FTEs in the Workplace
FTEs are most widely used by companies to determine their employees’ workload, with the perspective of trying to determine how many part-time employees and the hours they work add up to the same number of hours worked by full-time employees. It is critical for accounting purposes and determining wages, and for calculating the company’s expenses when paying its workers.
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.
The breakdown for an average, full-time worker and their hours on an annual basis is calculated by assuming the worker follows an 8-hour workday and works five days out of the week:
8 hours per day x 5 days per week = 40 hours
The figure is then multiplied by the number of weeks worked every year:
40 hours per week x 52 weeks per year = 2,080 hours
This is how a company, on average, calculates the average yearly number of hours that a full-time employee works.
How do I calculate full-time equivalent (FTE) hours?
The calculation of full-time equivalent (FTE) is an employee’s scheduled hours divided by the employer’s hours for a full-time workweek. When an employer has a 40-hour workweek, employees who are scheduled to work 40 hours per week are 1.0 FTEs. Employees scheduled to work 20 hours per week are 0.5 FTEs.
An employer with a 35-hour workweek would simply divide the employee’s scheduled hours by 35 to determine the FTE. For example, an employee scheduled to work 21 hours per week would be 0.6 FTE when the full-time workweek is 35 hours.
FTE calculations are about hours worked rather than number of employees. You could have four employees and only one FTE. Four 0.25 employees would be 1.0 FTE. Amir, Mark, Phyllis and Sue could each work 10 hours per week and the total would be 40 hours worked, or one FTE based on a 40-hour workweek.
Employers may use the FTE calculation for different purposes, such as benchmarking revenues or profits per employee. Converting hours worked by part-time employees into full-time equivalents can be helpful when calculating these metrics.
Some laws, such as the Affordable Care Act (ACA), specifically define how an FTE is calculated and require employers to count FTEs to determine how the law applies to their organization.
What does FTE stand for? FTE stands for full-time equivalent, and it measures how many total full-time employees or part-time employees add up to full-time employees your company employs. It helps employers forecast workforce needs for hiring employees, and it’s a metric you might need for things like tax credits and compliance with the Affordable Healthcare Act. How you calculate FTE depends on the reason it’s needed. If you need to track employee hours or salaries, it’s useful to understand how to calculate FTE.
How to calculate FTE
Follow these steps to calculate FTE for an annual count.
1. List your employees and hours worked
Prepare a list of all the employees paid with a year-end W-2 form. Exclude 1099 independent contractors. Deduct approved leave hours, such as paid time off and sick leave.
2. Determine the number of hours considered to be a full-time position
Companies usually define their full-time schedule by the maximum hours authorized, which is 40 hours per week. In this case, any employee working less than 40 hours per week would be considered to be a part-time employee. If a company defines a full-time position as being 30 hours, then any schedule under 30 weekly hours is considered to be part-time.
3. Calculate the hours worked per year
There are 52 weeks in a year. Multiply the number of weekly hours by 52.
4. Add up all full-time hours
Add up all the full-time hours worked by your full-time employees.
5. Add up all part-time hours
Add up all the part-time hours worked by your part-time employees.
6. Determine the part-time FTE
To determine the part-time FTE, divide the total hours worked by part-time employees by the annual hours worked by full-time employees (calculated in Step 3).
7. Calculate your total FTE
Add your part-time FTE to the full-time FTE. To calculate the FTE value for a specific position, simply divide the number of hours worked by the number of hours considered to be full-time. If you use 40 hours as full time, someone who works 35 hours has a 0.875 FTE. Someone who works 30 hours has a 0.75 FTE.
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