2) Divide the total part-time hours by the standard full-time hours (defined in step 1). Therefore, a part-time worker who works 20 hours per week (FTE value of 0.5) should make $100,000 (half). A large mix of full-time and part-time workers can make assessing your workforce across departments or the entire organization challenging. Since our fictional organization has three full-time employees (Sam, bookkeeping Rebecca, and Terry), our full-time FTE is 3. In other words, you add all your full-time, part-time, and seasonal employees’ hours together.
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When you calculate FTE, you can find the costs of time, personnel, and money to determine staffing decisions. It’s used by businesses to figure out how many full-time or part-time employees are in a company and for organizing projects. It’s an important element to accounting to determine employee wages, hours of service, and your company’s expenses. By comparing that figure with industry averages the company can analyze its current productivity. Understanding Full-Time Equivalent (FTE) is essential for standardizing how organizations measure staffing fte finance meaning capacity and align workforce needs with business objectives. Learn how machine learning is driving smarter workforce decisions and explore how AI-powered planning tools are redefining labor cost analysis in today’s business environment.
Leveraging FTE insights for planning and implementing development initiatives
While individual gig workers frequently don’t adhere to a traditional 40-hour workweek, they may accumulate an FTE’s worth of hours across different gigs. For instance, a freelance writer might work 20 hours for one client and 20 hours for another in a given week, effectively equating to a 1.0 FTE status. However, for strategic decisions such as restructuring or downsizing, headcount might be the chosen metric. Reductions based on FTE might inadvertently result in the loss of multiple part-time positions instead of full-time https://www.bookstime.com/ roles.
How to adjust FTE calculations for different full-time definitions
- By understanding the FTE value of your workforce, you can make informed decisions on hiring, developing, or restructuring to ensure financial efficiency and productivity alignment.
- Leveraging FTE analysis can significantly contribute to optimizing the workforce budget.
- For example, four half-time employees would count as four in headcount, but only 2.0 in FTE.
- How to Calculate FTETo calculate FTE, divide an employee’s total number of hours worked by the full-time hours defined by the employer (usually 40 hours/week).
- Add your team’s billable rates to forecast project costs, and track actual hours worked to monitor budget spend.
Simply put, FTE stands for Full-Time Equivalent, a metric that helps businesses measure the number of full-time employees they would need to complete the work currently being done. This encompasses part-time employees, freelancers, and even a combination of full-time and part-time staff. It’s a crucial element in workforce planning, giving managers a clearer picture of staffing levels. Whether in HR, finance, or project management, implementing key workforce metrics such as FTE vs headcount is essential for accurate workforce planning, resource allocation, and financial forecasting. Both of these crucial terms are fundamental, yet they serve distinct purposes and provide different insights into your organization’s human resources. The FTE calculation provides a clear picture of your actual workforce size by accounting for both full-time and part-time employees.
- Full-Time Equivalent (FTE) is a tool to use when calculating the costs of a project or forecasting employee hours and salaries.
- Even if Jack gets more done working half-time than Lisa, who works full-time, he is still 0.5 FTEs and receives 0.5 of the FTE salary.
- If you go beyond the basic calculations, you sometimes end up in more complex situations.
- For example, consider the additional employer taxes and company benefits attached to full-time positions if you’re transitioning part-timers to full-timers.
- And, even though the company employs 4 people, they only have 2.0 full-time equivalent employees.
- If you want your PPP loan to be completely forgiven, you need to keep the number of FTEs during the 24-week PPP period the same as it was prior to COVID-19.
The next step is to add the annual hours for each type of employee, meaning we add all the full-time and part-time working hours (while keeping the numbers separate). Next, you have to officially define full-time hours at your organization. As stated, the FLSA leaves this declaration up to employers, so no federal law dictates what is and isn’t full-time employment. First, you must count all the weekly hours your W-2 employees worked during the year.
