For example, if a part-time employee works for 26 hours one week, their FTE value would be 0.65 (26 hours worked / 40 hours). And if an employee works a full 40-hour week, their FTE value would be 1.0 (40 hours worked / 40 hours). Some businesses list this information in their employee handbooks or offer letters.
- Save time, save trees, and track every signature down to the minute.
- However, determining the FTE for Jimmy and Marta requires calculation.
- An explanation of how FTE is calculated and the various ways in which a business can use this metric when forecasting and budgeting.
- Let’s say that Sarah is a part-time employee who works 28 hours per week.
- This process requires establishing the hours every employee is scheduled to work.
That would mean that a full-time employee would work an approximate of 40 hours a week and 160 hours a month. With the variety of working options available today some employees may work part-time while others may only work at certain times of the year or in several other flexible ways.
The FTE calculation methods for determining business size
Full-time employee means a person engaged to work for the full ordinary hours prescribed. Full-Time Equivalent means the amount of time an employee works during a school year as a percentage of the amount of time a full-time employee in the same position would work during a school year. With Float, you can check the total leave balance for FTE or PTE employees using the time off policies feature. You can view the unused balance as a whole number or percentage for on-the-fly planning. If you’re worried about salaries and benefits, you can use FTE calculations to learn what you’re currently paying those working full-time hours.
Full-Time Equivalent means 2,080 hours per annum, which equals one full time technical position. Seeing the accrual of leave in real time makes it easier to calculate the resources needed at any given time. Find the average number of hours worked to see if there’s room for scaling or if you need to cut back to save on costs.
How is FTE Calculated?
When using FTE alongside other performance metrics, it can become easier to understand per-employee costs and output in a large organization. FTE is a very specific term used to calculate whether a company is required to provide benefits under the Affordable Care Act and the Family Medical Leave Act , for example. Employers can also monitor workloads for future budgeting and staffing with FTE. This section requires that all ALEs must provide their employees with affordable health care. In practice, these numbers still usually fall somewhere between 32 and 40 hours per week, with 40 hours per week being a common norm for a full-time schedule.
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll. This is just one example of how FTEs can be used to adjust staffing levels — in reality, there are many other ways that this could be done.
FTE Meaning: What Does FTE Mean In Business?
For example, you’ll want more hands on deck in a restaurant during the busy holiday and summer seasons. In the construction industry, you’ll need a larger headcount when a bigger project comes along. It’s easier to plan for this when you can visualize your project needs and team capacity. https://quickbooks-payroll.org/ Next, you must determine whether you need more resources now or in the future. This will depend on your industry and the type of projects you embark on. Calculating FTE even gives small businesses insight into whether they’re paying too little or too much in project costs.
For the purposes of calculating FTE, most employers consider a full-time employee one who works between hours a week. Although the DOL doesn’t define what a full-time employee is , the IRS does, so make sure that as work roles change, you keep up-to-date records of your FTE employees. Your FTE calculations must be accurate for IRS and Department of Labor reporting. At 50 FTEs, you’re required by the ACA to provide health insurance to your employees and by the FMLA to allow employees to take up to 12 weeks of leave for qualifying conditions.
Example 2: whole business
There are 2,080 working hours in the year, and the GHI Company staff works 22,880 hours during that year. When 2,080 working hours fte meaning are divided into 22,880 hours, the result is 11 FTEs. Companies can also expand the same formula when considering annual hours.
- To qualify for PPP loan forgiveness an organization must have maintained the same level of FTE employees during certain specified time periods following the loan disbursement.
- Considering the average FTE or full-time working week is 40 hours, this means you have 3 full-time staff.
- When 2,080 working hours are divided into 22,880 hours, the result is 11 FTEs.
- Several part-time employees may be equivalent to a full-time employee, depending on the number of hours they work during the listed periods.
- This metric can help companies in project management and federal programs, among other things.