What Is FTE and How to Calculate It?

Depending on the type of work that is required, management can decide the number of full-time employees that are needed for a particular project and assign employees to those positions accordingly. Every employer with 50 or more FTEs is qualified for the ACA-compliant benefits, per the Affordable Care Act (ACA). You can figure out how many FTEs your company has and make sure you receive the benefits required by the ACA. A full-time employee is that who works for 30 or more hours a week, according to the ACA. Additionally, a worker who puts in 30 or more hours will be given 1 FTE.

It’s about assigning the best people to the task and putting them in a position to succeed (without wearing them thin). If you’re offering health coverage to remote workers, there may be some additional considerations. Calculating FTEs will also determine an employer’s duties under the shared responsibility provisions of the Affordable Care Act. In this article, we will explore the meaning of FTE from a U.S. perspective, how it is calculated and the purposes of doing so as an employer. FTE calculations are also important when determining eligibility for certain federal programs and benefits. An explanation of how FTE is calculated and the various ways in which a business can use this metric when forecasting and budgeting.

  • Add your team’s billable rates to forecast project costs, and track actual hours worked to monitor budget spend.
  • 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.
  • By understanding FTE, businesses can make informed decisions when selecting a BPO provider and ensure that they are getting the best value for their money.
  • If an organization considers full-time to be a 40-hour working week then one full-time employee will count as 100% FTE.

In other words, an employer who has both full-time and part-time workers can quantify all hours worked in terms of full-time employment. Full-time equivalent, or FTE, is a calculation human resource managers use to determine how many full-time employees they have on staff. To get this figure, they add the hours paid to all employees (full-time, part-time, etc.) and divide that by the number of hours a full-time employee would work over a given period. In most cases, employers fall below the threshold required to be an ALE and are, therefore, not subject to the employer shared responsibility provisions. All the above-mentioned factors end up costing the company something and affecting its bottom line.

This is a measure of the cost of an individual or team’s work relative to their productivity. Generally speaking, the lower the cost per FTE, the more cost-effective a given provider is. This is important to consider when comparing BPO providers to get the best value for money. For example, if an employee works 40 hours in a week but is expected to work 40 hours in two weeks, the FTE hours would be 0.5. While the Full-Time Equivalent (FTE) metric offers invaluable insights into workforce dynamics and assists in strategic decision-making, it has limitations. Understanding these drawbacks is essential to ensure balanced and comprehensive human capital management.

Yearly, a company generally considers an FTE to be valued at 2,080 hours. To delve further into the matter, let’s look at how FTEs are calculated. Now, the exact number of hours that a 100% FTE represents will depend on your company’s policies and the various labor laws in your state, country, and more.

Sarah’s FTE is 0.7, so she works 70 percent of a full-time work week. 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). Being a basic criterion in staff controlling, it is one of the most important staff indicators for companies.

FTE Full Form: ACA-Compliant FTE

Maybe your team needs extra help from temporary workers or new hires. Or perhaps some of your part-time employees can put in additional hours to pull the weight of a larger project. It refers to the number of hours worked by a single employee in a week. The annual FTE count is considered to be 2,080 hours, which breaks down into eight hours per day, five days a week.

If so, confirm you’re offering the right level of health insurance to your team to prevent a tax penalty. Read our employer’s guide to find out more about different types of insurance you can offer your employees. Read our employer’s guide to find out more about how to hire employees in Europe, Asia, Africa, or elsewhere. Join BambooHR and League to explore how to go beyond wellness resolutions so your organization can reap all the benefits of a healthy workforce. There are many other programs and laws that are applicable to companies with a certain count of FTEs – consult with an accountant who is familiar with the laws of the country your business operates in.

  • Let’s say your company considers a full-time workweek to be 40 hours.
  • The estimated number of FTEs each year is 2,080 hours, or eight hours per day, five days per week.
  • By understanding the FTE of their workforce, businesses can ensure that they are meeting their obligations under labour laws.
  • Generally speaking, the lower the cost per FTE, the more cost-effective a given provider is.
  • This number will be different based on the type of job and the number of hours worked.

Both company leaders and HR can evaluate job descriptions, projects, or virtually any other work need and determine the FTE number necessary to successfully complete a particular job. Workload balance is another important aspect of business efficiency. That’s where FTE comes in because you can use the FTE calculation to assign https://1investing.in/ a certain number of employees to departments within an organization, depending on each respective department’s work needs. Our team at Float employs a global remote workforce, with most working from home (or from a co-working space). We operate asynchronously, so everyone can choose which hours work best for them.

What is Full Time Equivalent (FTE)?

So, each of your part-timers count as a fraction of a full-time employee. Well, employers calculate FTE for several reasons but one of the most important reasons is that the calculation can help your organization run more efficiently through the standardization of hours and pay. In most companies, this means the employee works 40 hours, but some companies use other time amounts to describe full-time status. FTE 100% refers to a full-time employee or the equivalent of a full-time employee.

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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. Determining the FTE of your company is crucial for its productivity. Imagine that, with the same FTE, an employee can deliver 100 units, while another only delivers 30.

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. Using time tracking software, like Homebase, will allow you to run a historical report based on employee work history and status to gather the average hours worked using custom fields.

What is FTE?

Or you could allocate work to 12 full-time and one part-time resource for five days. The concept of ‘100% Full-Time Equivalent’ (100% FTE) is a term used to describe the full-time employment of a single individual, with no other employees working part-time, in a business. 100% FTE is an important measure of a business’s workforce, as it represents the total number of positions that are considered to be ‘full-time’. 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. To determine this amount, ask yourself, what do you expect a full-time employee to work in terms of hours per week? The answer should be between hours a week per employee (when considering full time).

Full-time employees usually work more than 30 hours a week or more than 4 days a week. They’re also generally employed on a permanent basis as opposed to seasonal or temporary. Full-time workers are also typically entitled to benefits like medical or vacation pay.

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You can view the unused balance as a whole number or percentage for on-the-fly planning. Figuring out exactly how many people work for a company is more complicated than asking for a show of hands. And while they’re all valued as part of the company, there are certain situations in which they’re not considered in the same way when calculating your headcount. 100% FTE or 1.0 FTE refers to one full-time employee or a number of people who make up the duties of one full-time position. When using FTE alongside other performance metrics, it can become easier to understand per-employee costs and output in a large organization.

An understanding of FTE also helps employers decide when to hire staff for short-term projects. In this way, scheduling projects based on the FTE calculation allows for greater accuracy in workforce planning and the efficient allocation of resources. It is one unit of work in the case of a worker, or it is the work that a student completes during a school day. The term “full-time equivalent” (FTE) refers to the number of hours a single employee puts in during a workweek.

You can also use the FTE total to remain compliant with federal, state, and local labor laws that may be based on employer size such as mandatory sick time laws. FTE calculations can also help track salaries and labor costs within the organization. For example, HR departments can use FTE calculations to standardize the working hours and salaries of employees working on a part-time basis. So, workers who work 20 hours in a standard 40-hour workweek are 0.5 FTE because they’re working half the time of full-time workers. Knowing how many full-time equivalent employees you have is beneficial for several reasons. For one, it makes planning resources and workloads across full and part-time staff easier.

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