What does FTE or full-time equivalent mean?

fte meaning

Use the data you gathered for the last section’s analysis to create benchmarks for timing your hiring decisions. It assists in converting the workload to be completed by a part-time employee taking the base of a full-time working employee. A resource has a personal calendar with shifts set for 8 hours a day. As you can see, because the project only took 100 hours, you have one FTE left over. This tells you that, when allocating resources for future projects, you can reduce the number of FTEs by one and still have enough manpower to complete the project. This is because the purpose of an FTE is not to see how many employees you have, but rather to measure the amount of work that’s being done. In other words, it allows you to compare different types of staffing arrangements on a level playing field.

fte meaning

For the most accurate FTE calculation, hire a tax lawyer or accountant to calculate them for you. FTE has a bunch of uses and different ways to calculate it depending on your situation. It’s a simple calculation to make and you just need to know your employee details and go from there.

How to Calculate FTE?

The definitions of full-time and part-time vary depending on law and policy. Most employers determine full-time status based on business needs and typically consider an employee to be full-time if they work anywhere from 32 to 40 or more hours per week. Regardless of your company’s definition of full-time status, coverage under various employment laws is based on the definition provided in the law. For instance, under the Affordable Care Act , full-time means working, on average, at least 30 hours per week. By contrast, under the Families First Coronavirus Response Act , full-time employees are defined as those normally scheduled to work at least 40 hours each workweek. To get a total, divide the total number of full-time hours worked by part-time hours worked. For example, if your full-time employees work 40 hours per week and part-time workers average 20 hours per week, divide 40 by 20 and you’ll get 2, meaning two part-time workers equal one full-time employee.

fte meaning

The following example will help you understand the concept of FTE in terms of total hours worked for all employees and the time they worked. Then, the total hours that both full and part-time employees worked is divided by the full-time equivalent hours per employee. The company can make a different combination to satisfy this 62.5, like six full-time employees and one part-time employee to work on the project for 10 days. Or even appoint 12 full-time and one part-time resource for five days to complete the work. The company can modify and diversify the calculation by considering the project’s scope and requirements.

Q: Are new hire paperwork requirements the same for full-time and part-time employees?

Take into account seasonal and annual growth trends, making use of your most current market analysis figures. For example, you could use a 1.3 multiplier to cover taxes and benefits. You could then apply a 1.8 multiplier to this number to account for equipment, facility rent, equipment, etc. You could apply a 1.2 multiplier to include the costs of managing an employee and providing them with in-house IT support. Now that you know how many hours a full-time employee works for your company, you probably want to know the totalcost of an employee. FTE allocation value is the hours available for a resource to work on a project based on the resource calendar divided by available hours based on the Standard Calendar.

  • The standardized figure is 1.0, which refers to a full-time worker.
  • For example, imagine the project will involve designing a new website.
  • To calculate the total FTEs for your business, you need to add up the hours worked by all employees, both full-time and part-time.
  • Apart from the FFCRA, certain states and local jurisdictions also require employers to provide paid sick leave to employees.
  • Outsourcing workload to contractors, also called conversion, is usually not advised as internal resources should be used to achieve the tasks.
  • There are many ways that you can measure the people power and resources in your company, like tracking worked hours, or using a simple head count.

Full-Time Employees generally work more than 4 days or 30 hours a week and are permanently employed, as opposed to being temporary or seasonal. In many countries, a Full-Time Employee is also entitled to health-care benefits and vacation pay among other legal employment standards. The ACA legally requires that employers, individuals, and the government each help offer insurance to as many people as possible.

How do you convert FTE to hours?

The Paycheck Protection Program, established by the CARES Act, provides funds to small business owners to help them keep their workers on payroll. Within this method, the employee is credited with 40 hours for each week when payment was due . Within this method, the employee is credited with 8 hours for each day he or she would be required to work at least 1 hour . This section requires that all ALEs must provide their employees with affordable health care. 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.

Learn more about small business finance and accounting on our resource guide. Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling. Overall, FTEs estimates fte meaning are presented by each government agency during the annual budget planning. FTEs must comply with applicable laws and the budget allocated to each agency. In the event of voluntary separation incentive proposals, also called buy-outs, FTEs are adjusted on a one-on-one basis.

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Additionally, FTE could also be used to establish revenue benchmarking and employee profitability. Thus FTE, termed Full-Time Equivalent is a unit that represents the total hours worked by a full-time employee on a regular basis. The costing team uses the concept of converting the work executed by part-time employees as compared to full-time employees. It helps determine the number of full-time and part-time employees for a task or project. FTE concept helps determine the workload and accordingly determines the number of part-time employees and the number of hours they will work. This is crucial for accounting purposes and wages determination, and total expenses incurred for paying the workers.

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