How to Calculate the Full Time Equivalent FTE in 4 Steps

full time equivalent definition

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. Three of them work full-time and the rest work 10 and 5 hours in total. The Affordable Care Act is designed to reduce the cost of health coverage for uninsured and lower-income individuals and their families. Under the ACA, some large employers might be responsible for providing minimum essential coverage or making shared responsibility payments to the IRS. FTEs are calculated in different ways for different accounting uses or for calculating eligibility for different federal programs. If you fail to meet the above mandate for part of the year, you owe payment for each month you didn’t meet the requirements.

  • The term “full-time equivalent” is used a variety of ways, but most commonly it is a way to measure the number of hours worked by one or more employees on a project.
  • For example, at the University of Utah Health, eligible hospital and clinics staff members who work the equivalence of 0.50 to 0.74 FTE of a full-time schedule will accrue at 50% of the full-time benefit rate .
  • Being a basic criterion in staff controlling, it is one of the most important staff indicators for companies.
  • Means a way to measure how many full-time employees are required to provide the appropriate level of services to fulfill minimum fidelity requirements.
  • Such calculations facilitate accounting processes such as estimating wages, payroll, costs, etc.

Full Time Equivalentservice means the amount of service compared to a work schedule of at least thirty hours per week. For example, an employee who works 15 hours per week for 3 years and 30 or more hours per week for 2 years has 3.5 full-time equivalent years of service. Full Time Equivalentmeans the number of scheduled hours of work in a week that equals one full‐time employee. There are a few pros and cons to using full-time equivalent when determining how many employees to staff. On the plus side, FTE allows managers to more accurately compare the workloads of employees across departments or shifts. It can also help with budgeting by allowing you to predict how many hours of labor will be required for a certain amount of work.

Example #1: 1 full-time employee / 40-hour workweek

It is crucial to note that this method of computation assumes that the employee works 40 hours per week, 52 weeks per year; if the employee has any paid time off, holidays, etc., the calculation may differ. FTE is used to figure out how productive a team or organization is by dividing the number of full-time employees by the total number of hours worked by all employees. Adding more FTEs to a team or organization can make them more productive. This can be done by hiring more people, giving current employees more hours to work, or putting in place better processes and technologies. When you use FTEs, it’s simple to measure how well you’re doing at work, especially if you have part-time employees. You can contrast your staffing level with your competitors in your industry after converting part-time meters to FTEs.

Full time equivalents measure how many employees are needed or used assuming that all employees work a full time schedule. FTEs are widely used in headcount calculations that measure the number of employees. Taking a headcount in FTEs is done by totaling the hours worked by all types of employees, and dividing by the number of hours a full time employee works. It is useful for comparisons since today’s workplace often includes a mix of full time, part time and temporary employees. When your company’s profitability rises, it means it’s making more income. The term “full-time equivalent,” or FTE, refers to the number of part-time employees who provide a company with the equivalent of full-time hours.

How to Calculate Full-Time Equivalent

Full Time Equivalent refers to the unit of measurement equivalent to an individual – worker or student – one unit of a work or school day, applicable in a variety of contexts. In most cases, full time equivalents measure an employee or student and/or their workload. Depending on how big a company is, the ERC is calculated differently. Companies with an average FTE below 100 receive tax relief based on all employee wages, while companies with an average FTE above 100 receive tax relief based on wages paid to employees who were not working. ​​FTE is the full-time equivalent hours that all the employees in your business represent.

  • It is also sometimes used as a way to staffing levels in an organization.
  • There are companies that have a significant number of people working part-time, i.e., workers who spend only a short time in the company.
  • Full-time equivalent is a way to measure the amount of work done by an employee or group of employees.
  • There are a few pros and cons to using full-time equivalent when determining how many employees to staff.
  • Divide the total hours worked by all of your employees by the number of available full-time hours in a year .
  • Our model will then instantly calculate the Full Time Equivalent for you.
  • For example, a project that is estimated to take 600 hours of work can be accomplished in a variety of ways depending on your allocation of staff and time requirements.

When Holly met with the head nurses from the different floors, she found they each had different staffing needs. The floor that handles cancer patients, for example, needs more lab techs than the floor that handles pediatrics. The modern workplace often includes a mix of full time, part time and temporary employees. To do meaningful comparisons, the number of employees is often measured in full time equivalents. Remember that while this is the most typical method of converting FTE to hours, it might vary based on the firm and their definition of full-time.

FTEs calculation methods for federal programs and benefits

It’s unlikely that you only employ full-time employees in your company — you likely receive help from part-time employees or temporary workers. The full-time equivalency measurement lets you calculate the hours those employees work compared to a full-time workload. You can also calculate a full-time equivalent for both hours and salary. The following example will help you understand the concept of FTE in terms fte meaning of total hours worked for all employees and the time they worked. Then, the total hours that both full and part-time employees worked is divided by the full-time equivalent hours per employee. In the last step, just divide the total number of hours of full-time employees and part-time employees by the number of regular full-time hours to generate the full time equivalent for a certain period of time.

full time equivalent definition

A specific example is a fee-for-service , which can often be used in research and development projects. The fee-for-service is favored over FTE when the project requires less intensive development work. The full-time equivalent measure can also be applied to a student’s classes. For example, if the establishment requires 30-hour classwork per week and the student only completes 15, this will account for 0.5 FTE. Do you want help with the management of your company’s key figures, helping your team make the right decisions, and implementing the right measures in personnel planning?

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