What is Full Time Equivalent FTE

In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees. Suppose a company currently has 50 full-time employees on its payroll, along with 10 part-time employees. 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. However, if your company employs part-time employees as well, several of them together may equal 1.0 FTE. To calculate the FTE for all employees in your company, consider the full-time and part-time employees you employ. FTEs may also influence how many hours employees can accrue for PTO.

• As you will understand by the end of this article, there are plenty of situations in which knowing the meaning of FTE and how to calculate it can be quite useful.
• The full time equivalent, often abbreviated as FTE is an indicator that reflects an employee’s productive capacity.
• A seasonal worker is simply defined as employees who perform labor or service on a seasonal basis, such as retail workers during the holiday season.
• 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 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.

Once you decide why you want to use FTE, identify the appropriate calculation method, and follow it through. Let’s say that a full-time weekly schedule in your company is 40 hours per week, and your employees are scheduled with 40 hours of work a week. This is a straightforward example since each employee who works 40 hours per week in your company has a 1.0 FTE. Since both are considered to be full-time schedules in their respective companies, both count as a 100% or 1.0 FTE. 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.

Q32. Can I be counted as an employee if I own my small business?

If your business considers 40 hours to be a full-time workweek, then an employee working 40 hours per week would have an FTE of 1.0. In contrast, a part-time employee working only 20 hours per week would have an FTE of 0.5—which shows that their hours worked are equivalent to half of a full-time employee. An employee’s hours of service for a year include hours for which the employee is paid, or entitled to payment, for the performance of duties for the employer during the employer’s tax year.

Full-time equivalent (FTE) is a way for employers to standardize their headcount and combine their part-time workers’ hours to figure out how many full-time employees would work those hours. Seasonal workers are workers who perform labor or services on a seasonal basis as defined by the Secretary of Labor, and  retail workers employed exclusively during holiday seasons. By comparing that figure with industry averages the company can analyze its current productivity. There are some exceptions when calculating FTE for the purposes of the small business tax credit. 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.

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” question for more information on how to calculate the number of FTEs. However, if you pay your interns, you will need to include them in your calculations. One of the most common yet often perplexing compliance concerns HR teams encounter is calculating FTE, or full-time equivalency. From what fte meaning it is and why it’s used to how to calculate the number, find out everything you need to know about how to calculate FTEs. FTE is a crucial term in project management for resource allocation. Keep on reading to learn what FTE is, how it is calculated, and how it is used in project management.

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. The full-time employees work 40 hours per week and 52 weeks out of the year, meaning that the number of full-time hours worked on an annualized basis is 104,000 hours. The results will reflect the actual full-time payroll of the company.

What Is Full-Time Equivalent (FTE) & How Is It Calculated?

After all, the net costs of hiring additional part-time employees may in fact be lower than the more visible cost of overtime pay for existing staff, and FTE is used to uncover such findings. Seeing a value of FTE 100% means a single full-time employee or multiple part-time employees work those full-time hours. 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.

This gives us a figure of 0.7, which means that Sarah is equivalent to 0.7 FTEs. In its most basic form, FTE is calculated by dividing the total number of hours worked by full-time employees by the number of hours worked by all employees. First, let’s look at what full-time equivalent or FTE actually means. 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.

Differences Between Full-Time Equivalent Employees and Full-Time Employees

If the number of FTEs exceeds 10, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10, and the denominator of which is 15. The credit will be reduced based on the sum of the two reductions. This may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual FTE wages of less than $50,800 (as adjusted for inflation). Full-time equivalent (FTE) allows part-time workers’ working hours to be standardised against those working full-time. The standardised figure is 1.0, which refers to a full-time worker. No, people who own the organization or company cannot be counted in the FTE and average annual wage calculation.

A related term is pro-rata – part time employees are paid an annual salary pro rata, which means adjusted for their working hours. The Affordable Care Act (ACA) requires every employer with 50 or more full-time employees working at least 30 hours per week to offer health insurance to its employees. 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. Along with counting the hours worked, FTEs show how many full-time employees a particular company employs within a fiscal year or needs to employ to carry out a project.

Example #3: 2 full-time employees and 5 part-time employees / 40-hour workweek

This calculation can be very confusing if you’re not used to it, so to make things as clear as possible, let’s look at an example for calculating the FTE of a single employee. However, this formula has a few variations, depending on what you want to include. For example, you can choose to include only paid hours or both paid and unpaid hours (such as overtime). 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. When using FTE alongside other performance metrics, it can become easier to understand per-employee costs and output in a large organization.

Horizons can support your business by helping you hire full-time employees anywhere in the world. Whether you are looking to expand your business internationally, outsource your operations, or take on more remote staff contact us today to discuss your needs. The 2,080 figure can be called into question, since it does not include any deductions for holidays, vacation time, sick time, and so forth. Alternative measures of FTE that incorporate these additional assumptions can place the number of hours for one FTE as low as 1,680 hours per year. The exact number will depend on the country where the employment is occurring, since the number of holidays varies by country. In short, full-time equivalency (FTE) represents an employee’s total hours worked divided by the number of compensable hours in a full-time schedule during a fiscal year.

By comparing full-time employee’s numbers between industry competitors a company can analyze its current status about staffing, this can lead to conclusions like whether the company is under-staffed or over-staffed. Under normal circumstances, a full-time employee works 8 hours a day for 5 days a week. That would mean that a full-time employee would work an approximate of 40 hours a week and 160 hours a month. To help you determine if you are eligible for a small-employer healthcare tax credit, you need to count the number of employees employed in your company throughout the year. The calculation is straightforward — divide the employee’s scheduled hours by the number of hours that represent an official weekly full-time schedule in a company (e.g., 40 hours per week).

• Let’s jump in and decode the world of FTEs and their powerful influence on businesses.
• The FTE calculation counts part-time employees as a fraction of a full-time employee, most often on the basis of the number of hours worked.
• Under normal circumstances, a full-time employee works 8 hours a day for 5 days a week.
• Consequently, the FTE for a part-time employee working 20 hours a week would be 0.5.
• Being a basic criterion in staff controlling, it is one of the most important staff indicators for companies.
• FTE is used to determine staffing needs for projects by comparing the time that a person would work if they were working full-time to the number of hours they will actually work.

Any employee having at least 30 working hours per week (or 130 a month) is considered a full-time employee under this act. They also use it to calculate labor costs for the expected project workload and subsequently define the funds needed to finish a project. All the above-mentioned factors end up costing the company something and affecting its bottom line. For a business, specifically those with a large number of part-time workers, converting worked hours into FTEs is important in helping the company know how many full-time employees the part-time workers are equal to. Next, add the total hours worked by full-time employees and the total part-time hours worked by part-time employees. FTE also allows companies to standardise salaries by showing what the equivalent salary would be of a part-time employee were they working full-time.