FTEs are the essential data needed to accurately forecast and manage labor costs across the organization. Each FTE represents the fully loaded expense of having one full-time permanent employee on staff. FTE has other meanings in various contexts outside of human resources and accounting. Since the letters F, T, and E begin several words, this acronym can stand for many phrases other than full-time equivalent.

Common Mistakes in FTE Calculation

Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy. Many laws and regulations related to benefits eligibility, overtime pay, and other workforce standards depend on whether an employee is classified as full-time or part-time based on FTE status. Employee productivity can be measured to determine how much each full-time equivalent generates for the business. In other words, FTE allows companies to standardize headcount and measure workload capacity by converting part-time staff to a full-time basis. Understand how accurately gauging FTEs can optimize staffing, predict budgets, and support employee retention – a must-read for every modern HR professional.

Step 3. Calculate annual hours worked

It’s the key to unlocking the full potential of your team and your business. Simply put, full-time equivalent is the total number of hours worked by an gross vs net employee to meet the requirement for full-time status. Three full-time employees would have an FTE of 3.0 and the part-time FTE is 0.875.

Utilizing FTE for employee development programs

With the rise of large, dynamic data sets, artificial intelligence is transforming how FTE is calculated—enabling automated time tracking, smarter scenario planning, and more responsive workforce modeling. 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. Businesses are considered ALEs for the current calendar year if they had at least 50 full-time employees, including FTE employees, on average during the prior calendar year. For the purpose of this head count, a full-time employee is anyone who works at least 30 hours per week or 130 hours per month.

• Generally, the higher your profit per employee is, the more efficient your company is.
• This metric offers a clear perspective of your business’s overall workforce size regarding functional capacity rather than simply headcount.
• One of the most common yet often perplexing compliance concerns HR teams encounter is calculating FTE, or full-time equivalency.
• Along with teaching at business and professional schools for over 35 years, she has author several business books and owned her own startup-focused company.
• 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.
• In many organizations, top-level leadership uses FTE to identify where to invest in training, recruitment, or technological upgrades.

In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees. By adding the full-time and part-time hours worked, we can calculate the total number of hours worked by all employees for the year as 109,000. The Full Time Equivalent (FTE) represents a unit of measurement standardized to equal the number of hours worked by the typical full-time employee. Factors such as regular hours worked, overtime hours, paid time off, and employee classifications (full-time, part-time) should be considered in FTE fte acronym calculations.

Knowing how to accurately calculate and strategically apply FTE analysis helps optimize staffing, forecast budgets, align talent strategy to business goals, and support employee retention. The purpose of FTE calculating the equivalent of full time employee hours worked by all of the employees of a company. 50% FTE means that an employer’s non-full-time employees collectively worked 60 hours in one month.

• In that case, you might cross-train employees or invest in solutions like employee timekeeping software to track and reallocate shifts on-the-fly.
• So, in this case, you would add up all employee hours for the year and divide by 2,080.
• Always periodically review your FTE numbers, significantly when your workforce expands or contracts.
• This is for ease of calculating the cost — in time, money, and personnel — of a project, since it standardizes the unit of measurement.
• It is sometimes useful to know how the total number of full-time and part-time employees are working in a business.
• To qualify for this program, the company can’t have more than 500 full-time employees or FTEs.

Monthly FTE is total hours divided by standard monthly hours (e.g., 160 hours). Yearly FTE divides total hours by standard yearly hours (e.g., 2,080 hours). Part-time and seasonal workers contribute to FTE by calculating their hours worked as a proportion of full-time hours. For example, if a part-time employee works 20 hours per week and standard full-time hours are 40, their FTE would be 0.5.

FTE Calculation Methods

FTE calculations should be updated regularly to reflect changes in employee hours, staffing levels, and business needs. This could be done monthly, quarterly, or annually, depending on the organization’s requirements. Whether you hire employees as part time https://www.bookstime.com/bookkeeping-services/tampa or full time depends on your business needs and local regulations. A part-time workforce might save you money in wages and benefits but could, in turn, cost more in rehiring and training. To identify the FTE of part-time employees, divide the total hours worked by part-time employees by the annual hours worked by one full-time employee (i.e., 2,080 hours). A full-time position would equate to around 30 to 40 hours per week for most employers.