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. For all these reasons, it’s important to you learn to fte meaning calculate full-time equivalent employees accurately. FTE is important for calculating labor costs incurred by your company. By determining your company’s overall FTE, you can plan in advance and manage your payroll expenses.
Method 1: Simple FTE Calculation
When done manually, tracking down your employee’s hours and calculating the FTE is guaranteed to cause some headaches — but don’t worry. Cassie is a deputy editor collaborating with teams around the world while living in the beautiful hills of Kentucky. Prior to joining the team at Forbes Advisor, Cassie was a content operations manager and copywriting manager. It’s not just about numbers; it’s about leveraging FTE data to craft strategic masterstrokes in workforce planning, budgeting, and talent management. With FTE, you can figure out when to hire and whether a full time employee or a part time employee is required.
Determine Which Employees Are Full Time vs Part Time
According to the IRS and the ACA, part-time employees work fewer than 30 hours a week on average. This could be an employee who works 20 hours a week, an intern who works one day a week, or an employee who is on call or only works weekends. It could also be a temporary staff member who works an irregular schedule. If that’s not the case in your country or state, just adjust the numbers to reflect the labor laws you adhere to and your business practices. For example, if your full-time employee is obligated to work only 30 hours a week, you should use that number in your calculations instead of 40, as in our case. And let’s assume that you take 8 hours of work per day as a baseline for calculating your FTEs.
- For example, if a part-time employee works 20 hours per week and standard full-time hours are 40, their FTE would be 0.5.
- The first step to calculating the FTE of your company is to make a list of all of your employees.
- You can use this tool to double-check your calculations or automatically calculate this number.
- It’s essential to accurately capture and account for part-time hours to avoid underestimating or overestimating FTEs.
- In healthcare, FTE calculations often revolve around patient-to-staff ratios, bed occupancy rates, and clinical workload.
Why calculate FTE? And why for FTE calculation Excel isn’t enough?
- This is how a company, on average, calculates the average yearly number of hours that a full-time employee works.
- 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.
- In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees.
- Instead of just counting heads, FTE lets you see the real impact of your team’s hours which can be easily calculated and tracked automatically by a time tracking software.
- Since both are considered to be full-time schedules in their respective companies, both count as 100% or 1.0 FTE.
In this article, I answer all the questions about FTE I keep hearing from companies that use our resource planning and allocation software. FTE also dictates whether a small business qualifies for tax credits for providing health benefits. To qualify, the small business must have fewer than 25 FTEs — not counting owners, family members, and seasonal team members. As part of their IRS health care filings, organizations determine whether they are Applicable Large Employers (ALEs) under the Affordable Care Act (ACA) definition.
This indicates that the combined hours of your three part-time employees (80 hours), when divided by your regular full-time workweek (40 hours), equals two FTEs. In order to determine the number of FTEs created by your part-time employees, you would add their number of hours worked and divide it by the number of hours in a full-time workweek. If you run payroll weekly, you’ll likely have this data available. But if you pay monthly or semimonthly, you may have to divide the number of available work hours in the month by the number of hours the employee worked, on average, to calculate your actual FTE. If Mark has a 0.7 FTE on an annual basis, you need to multiply his FTE by the average number of hours worked by a full-time employee in your company per year.
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Employees who have more than 50 full-time employees or FTE workers, known as applicable large employers (ALE), must be in compliance with rules laid out by the ACA. These regulations include shared responsibility provisions and tax reporting https://www.bookstime.com/ requirements like issuing Form 1095-C when necessary. If you have a mix of full-time and part-time employees, the full-time equivalent (FTE) lets you represents the full-time hours that all of the employees in your business work.
Reasons for determining FTE
For example, businesses must calculate FTE hours for the Affordable Care Act (ACA) and prove eligibility for certain small business tax credits. Companies use full-time equivalent (FTE) measurements because they provide a standardized way to evaluate and compare the workload and contributions of employees, even when their work hours vary. It helps organizations align their workforce with business objectives and adapt to changing market conditions. 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.
Step 6: Calculate Your FTE
Similarly, seasonal workers’ hours are prorated based on their duration of employment. To determine your total FTE, add the total part-time hours worked, plus the total full-time hours worked. From there, if your full-time hours are 40 per week, divide the number by 2,080. If your total full-time hours are 30 per week, divide the number by 1,560. This will give you your total FTE for all full- and part-time employees for the year. You can use the FTE total each week, month, or year to determine company growth.
