How to Calculate the Full Time Equivalent FTE in 4 Steps

This program offers affordable and high-quality employee insurance policies to business owners. Divide the total hours worked by the number of full-time hours. This will determine the FTE of the company for a particular period.

If an employee were to take no vacation time, and he or she works 40 hours a week, it would add up to 2080 hours. Granted, U.S.-based employees often take two weeks of vacation, and their European counterparts may take upwards of four to six weeks. If you are using FTE calculations to determine future hiring needs, it makes sense to adjust the number of hours to fit your business. 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. If your project is estimated to need 250 hours of work to complete, take those 250 hours and divide them by 8 hours, a normal full-time workday. You’re left with 31.3 which is equal to how many full-time employees you would need to fulfill those 250 hours of project time.

What does FTE mean?

If, for example, your organization has 300 full-time employees and 1,000 part time contractors who work a varying number of hours, FTE calculations can simplify the total number of employees or hours worked. FTE goes even further than solely calculating project or staffing needs.

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. Get this by multiplying the number of full-time employees by the number of hours in a working week . 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. FTE counts part-time employees as some fraction of a full-time employee, usually based on the number of hours they work (though depending on the business, there are other ways of measuring a given employee’s contribution). When added together, the hours of your three part-time employees equal 80 hours. If you currently employ both full and part-time employees, you need to determine how many FTE employees you have.

The FTE calculation methods for determining business size

Eligibility of a small business to be eligible for tax credits. It helps in the cost determination of a project considering the personnel management. For an instant, a project estimates to require 500 hours, with the help fte calculation of FTE, you can calculate the following equation. The amount they are liable to pay the IRS for an employer shared responsibility payment. This is also known as “the employer mandate” or “the pay or play provisions”.

This process needs to be repeated for every payroll week throughout the year. If your employees work the same number of hours every week, the calculation process will be simple.

FTE Calculation

And, the actual number of hours attached to a FTE will also depend on your organization’s policy. However, bear in mind that this only applies to positions that work 30 hours per week when assigned with 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.

Outside of the business environment, FTE is also used to measure a student’s class load or involvement in a school project… It seems like we never leave school behind. FREE INVESTMENT BANKING COURSELearn the foundation of Investment banking, financial modeling, valuations and more.

What Is Full-Time Equivalent? How to Calculate FTE

This application is not valid for students attending any program for less than three days. FTE help in simplifying scheduling by converting workload hours into the number of people required to complete that work.

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. You should also recognize the difference between FTE and an overall employee headcount. With a headcount, each employee counts as one, regardless of how many hours they work. FTE refers to the number of hours that are considered full-time. When you are determining FTE, it’s important to know what a full-time workweek means to your company. This method of calculation is a common way of creating an accurate forecast.

By knowing how many full-time equivalents you have, you can see where your organization has room for growth. One option is to bring on a part-time employee on a full-time basis temporarily. The Paycheck Protection Program is designed to prevent job losses during the pandemic by giving loans to small businesses to cover payroll expenses and other costs. A portion of this loan can be forgiven based on the number of FTE workers an employer has on its payroll.

It measures the labor capacity a project, activity, or task needs. The main purpose of using FTE is to calculate the cost — in time, money, and personnel — of the project. The business uses this concept in project management and resource management for staffing decisions. Speaking of time off policies, if you’re in the U.S.,the Affordable Care Actrequires ALEs to offer health insurance https://www.bookstime.com/ to their workers. You’re considered an ALE if you have at least 50 FTE employees. Add your team’s billable rates to forecast project costs, and track actual hours worked to monitor budget spend. To be required to provide COBRA continuation coverage, a company must employ at least 20 full-time equivalent employees on more than half of its working days in the past year.

Step 3

It could require 15 full-time employees (600 hours/40 hours) five days to complete, 30 part-time employees five days to complete, one full-time employee 15 weeks to complete, or a combination of these. 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.

Full-time equivalent is used in project management and to decide eligibilities for federal programs. Thus, the number of full-time employees working full eight hours is 62.5.

How to Calculate the Full Time Equivalent

Remember, to average the number of employees you employ across the year, especially if you run a seasonal business. Obviously, these multipliers only provide a rough estimate of your costs — and vary widely from the office to the factory floor. Though estimates are estimates, you can get a quick picture of your employee cost withsimple multipliers. Use the data you gathered for the last section’s analysis to create benchmarks for timing your hiring decisions.

• The Paycheck Protection Program, established by the CARES Act, provides funds to small business owners to help them keep their workers on payroll.
• Essentially, it relates to the actual hours both full-time and part-time employees work during a regular workweek.
• In our example, Jimmy and Marta would be considered part-time employees.
• We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.

Using Hours for data entry will directly save the specified hours. Get instant access to video lessons taught by experienced investment bankers. Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts.