For employees who don’t work standard hours, such as nine to five, employers can calculate an FTE. This helps them manage employee hours and payroll.
Full-time equivalent (FTE) is a metric to determine how many full-time workers an organization has. It’s used to keep an eye on the budget and to stay on top of benefits administration. FTE is also an important measurement for legal purposes by helping organizations comply with local laws and regulations. However, these are just a few reasons why FTE is important. Let’s explore them further.
FTE comes with a ton of benefits. From improved hiring to driving growth - let’s get into it.
Financial Planning
FTEs are a game-changer for budgeting and financial planning. They help managers estimate labor costs and set timelines for projects. Finance teams also use FTE data to forecast finances and analyze revenue per employee.
Strategic Hiring and Resource Allocation
FTEs assist in making smart hiring choices. Businesses can compare costs between part-time and full-time employees, finding the best fit for their needs. Plus, FTEs ensure the right number of workers, avoiding over or understaffing.
Efficient Resource Management
With FTEs, organizations can optimize resources and team performance. Knowing the right staffing levels ensures teams can handle their workload effectively, improving efficiency and reducing unnecessary expenses.
Performance Evaluation and Growth
FTE data helps evaluate employee productivity and identify areas for improvement. Businesses can compare performance across teams, making data-driven decisions to drive growth and success.
Funding and Grants Opportunities
In certain industries, like healthcare and education, FTEs are essential for securing funding and grants. Government agencies rely on this data to allocate resources based on full-time employee numbers.
FTE is a valuable tool for businesses. By leveraging FTEs, companies can make informed decisions in the ever-changing world of work.
Knowing how to calculate FTE properly is an important tool in your back pocket.
1. List Your Employees and Hours Worked
Make a list of your employees and their weekly work hours. Remember to exclude paid leave and sick days. 1099 contractors don't count in this calculation.
2. Define Full-Time Hours
Decide how many hours make up a full-time position, typically 30 to 40 hours weekly. Anyone working less is part-time.
3. Calculate Annual Hours Worked
Multiply the weeks in a year by the full-time hours to get the annual hours worked.
4. Add Full-time and Part-time Hours
Total the hours worked by all full-time employees and all part-time employees separately.
5. Identify Part-time FTE
Divide the total hours worked by part-time employees by the annual hours worked by one full-time employee (usually around 2,080 hours).
6. Determine the Total FTE
Add the number of FTEs for full-time employees (usually 1 FTE each) to the part-time FTE calculated in step five.
