Once companies specify the full-time hours, they can use it to calculate the full-time equivalent. This process requires establishing the hours every employee is scheduled to work. Subsequently, companies must divide the actual scheduled hours by the number of full-time hours. A headcount report is a collection of data that typically contains information on an employee’s age, job title, salary, gender, ethnicity, retirement age, and more.
All together Jack, Leva and Julia’s hours make up 0.5 + 0.375 + 0.125 or 1 FTEs. And, even though the company employs 4 people, they only have 2.0 full-time equivalent employees. Under the ACA, certain small businesses are eligible for a small-business tax creditto help with the costs of offering health benefits to employees. One qualification for this credit is that the business must have 25 or fewer FTEs. It is sometimes useful to know how the total number of full-time and part-time employees are working in a business.
How To Calculate 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). Your FTE calculations must be accurate for IRS and Department of Labor (DOL) reporting. At 50 FTEs, fte meaning finance 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. Full-Time Equivalent (FTE) provides the basis for understanding the individual’s contribution towards organizational success.
- For example, if a company requires employees to work at least 35 hours per week, they would be considered full-time.
- 100% FTE can also be achieved in several other ways, for example, through two part-time employees (who each work 20 hours per week) or four employees who work 10 hours per week.
- The primary purpose of the full-time equivalent metric is to help in project management.
- The FTE is calculated by taking into account the number of hours worked in a full-time weekly schedule and the actual number of hours employees work.
- Here’s a breakdown of everything you need to know to calculate FTE for individual projects.
This metric can help companies in project management and federal programs, among other things. However, they must consider specific instructions provided by programs as well, if any. By comparing that figure with industry averages the company can analyze its current productivity. To determine your total FTE, add the total part-time hours worked, plus the total full-time hours worked. From there, if your full-time hours are 40 per week, divide the number by 2,080.
The benefits of a headcount analysis
In this article, we’ll teach you everything that you need to know about calculating this metric and why it matters. Next, you need to divide the total hours worked by all employees (1150) by the number of hours in a full-time work week (40). This gives you a figure of 29, meaning that your business has 29 FTEs. If an organization considers full-time to be a 40-hour working week then one full-time employee will count as 100% FTE.
Under normal circumstances, a full-time employee works 8 hours a day for 5 days a week. That would mean that a full-time employee would work an approximate of 40 hours a week and 160 hours a month. To calculate FTE correctly, you’ll need to quantify your total weekly available work hours; it’s an important component of the calculation. Available hours per week is the number of hours your business considers standard work time multiplied by the number of employees you require to accomplish those related needs. According to the IRS and the ACA, part-time employees work fewer than 30 hours a week on average. This could be an employee who works 20 hours a week, an intern who works one day a week, or an employee who is on call or only works weekends.
What is the meaning of FTE?
The FTE provides a more detailed representation than the headcount and the salary pro-rata, which are not without their merits. Mr. Arora is an experienced private equity investment professional, with experience working across multiple markets. Rohan has a focus in particular on consumer and business services transactions and operational growth. Rohan has also worked at Evercore, where he also spent time in private equity advisory. Here’s a breakdown of everything you need to know to calculate FTE for individual projects. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications.
- These metrics help HR understand the development of their workforce and the steps needed to achieve optimal productivity and performance.
- You typically would not include hours that owners or partners work within this calculation, but you can do so for your own accounting purposes if you want to include labor from ownership as part of your evaluation.
- FTE calculations are also important when determining eligibility for certain federal programs and benefits.
- FTE goes even further than solely calculating project or staffing needs.
- Read our employer’s guide to find out more about how to hire employees in Europe, Asia, Africa, or elsewhere.
In those cases, companies must consider those criteria and calculate them accordingly. In other words, do you know what the full time equivalent is and how it can help you better understand the needs of your organization? If you don’t know what it means, you should, as this metric can help you make important decisions. Through the full time equivalent calculation, it is possible to identify whether your small business needs to hire, restucture or reduce its staff, for example. In the landscape of business strategy, the Full-Time Equivalent (FTE) metric plays an essential role, offering critical insights into workforce dynamics.
Free Resources
The chart below displays the number of weekly hours worked with the corresponding FTE under the standard 40 work-week. Let’s run through the steps to calculate the FTEs that need to be replaced. Now that we’ve got that out of the way let’s look at how to calculate FTE. Employer costs vary based on the region, with contributions covering pension, medical, work-related injury, and unemployment funds.
However, the intricacies of China’s labor laws and administrative processes can pose formidable challenges, particularly when considering the recruitment of full-time employees as opposed to contractors. To engage full-time workers, foreign companies must either establish a legal entity in China or opt for the services of an Employer of Record (EOR). While the former involves time-consuming processes and complex legal obligations, the latter offers a streamlined approach to employee onboarding, payroll management, and compliance. If you have a mix of full-time and part-time employees, the full-time equivalent (FTE) lets you represents the full-time hours that all of the employees in your business work.
