Full Time Equivalent FTE Definition, How to Calculate, Importance

As you can see, because the project only took 100 hours, you have one FTE left over. This tells you that, when allocating resources for future projects, you can reduce the number of FTEs by one and still have enough manpower to complete the project. For example, imagine the project will involve designing a new website. The design phase might take 35 hours, the development phase might take 40 hours, and the testing phase might take 25 hours. You can calculate the FTEs required for the project by estimating how many hours each task will take and then adding them all up. This calculation can be very confusing if you’re not used to it, so to make things as clear as possible, let’s look at an example for calculating the FTE of a single employee. 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.

There’s a ton of flexibility that gives you the option to adjust with the scope of your project. FTEmeans the equivalent of a full-time scientist’s work time over a twelve month period . With this perspective on the FTE value, resource management can determine the number of full-time, part-time, contract, and seasonal workers to hire that makes the most sense for a company’s budget.

FTE Meaning: Final Words

FTE also allows companies to standardise salaries by showing what the equivalent salary would be of a part-time employee were they working full-time. A related term is pro-rata – part time employees are paid an annual salary pro rata, which means adjusted for their working hours. Full-time equivalency is a metric that quantifies the number of full-time employees at an organization based on hours worked, and quantifies how many part-time employees add up to a full-time employee. For example, if your organization’s work week is 40 hours, two part-time employees who each work 20 hours in a week would equal one FTE.

You’re able to establish all of your personnel requirements by calculating FTE. No, people who own the organization or company cannot be counted in the FTE and average annual wage calculation. However, if you pay your interns, you will need to include them in your calculations. Another key provision in the ACA states that all ALEs must offer a health insurance plan that qualifies as minimum essential coverage , otherwise known as the employer mandate. To calculate an FTE salary, you must convert an employee salary into a full-time equivalent salary within a full year, regardless of whether the employee has a full-time or a part-time position. Charlette Beasley is a writer and editor at Fit Small Business focusing on payroll.

What is a full-time equivalent employee?

If an organization considers full-time to be a 40-hour working week then one full-time employee will count as 100% FTE. 100% FTE can also be achieved in several other ways, for example, through two part-time employees or four employees who work 10 hours per week. If your project is estimated to need 250 hours of work to complete, take those 250 hours and divide them by 8 hours, a normal full-time workday. You’re left with 31.3 which is equal to how many full-time employees you would need to fulfill those 250 hours of project time. This unit of measurement is calculated by taking the average number of hours x worked per day multiplied by the number of days y worked per week. Full-time equivalent allows part-time workers’ working hours to be standardised against those working full-time.

• Considering that both count as a full-time schedule in their respective companies, both count as a 100% or 1.0 FTE.
• By determining your company’s FTE you get a better understanding of how effective and useful your workers are.
• 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.
• The figure ‘0.7’ can be understood better by converting it to a percentage.
• If it’s a 40 hour week, each employee that works 40 hours per week is equal to 1.0 FTE.
• The size and duration of the appointment is at the applicant’s discretion, but the appointment is always for at least 0.5 FTE or for a duration of at least 12 months.
• A full-time employee is equal to one FTE; a part-time employee is equal to 0.5 FTE.

With more than a decade of accounting and finance experience, Charlette has worked side-by-side with HR and accounting leaders to establish and help implement payroll best practices, controls, and systems. Her experience ranges among small, mid-sized, and large businesses in industries fte meaning like banking and marketing to manufacturing and nonprofit. Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.

Do Unpaid Interns Count Toward FTE Status?

This is a unit of measurement equivalent to in business that indicates the amount of time that an employee or student is working. One of the ACA’s regulations stipulates that the lowest-cost, employee-only health plan coverage option offered by an ALE—also known as minimum essential coverage —doesn’t exceed a certain percentage of an employee’s household income. This rate is known as the affordability threshold and is typically adjusted every year to account for changes in market https://www.bookstime.com/ conditions, healthcare premium growth, and the American economy. If the total is at least 50, the employer is an ALE and is required to offer health insurance to all qualifying employees. You can work out the Full-Time Equivalent by dividing an employee’s scheduled hours by the employer’s hours for a full-time workweek. Three of them work full-time and the rest work 10 and 5 hours in total. The first step in calculating FTE is to make a complete list of all employees.