What Does FTE Stand For and How is Full Time Equivalent Calculated?

full time equivalent

This financial term assesses the productivity of all employees, full-time or part-time, regardless of their employment status. Employers and businesses use this measurement to track employee workloads and make recruitment and budgeting plans for the future. For this example, let’s take a look at using the first method from above. Your average number of full-time equivalent employees during the reference period was 5. Add together your full-time employees and your FTE part-time employees to get your full-time equivalent employees. Depending on how big a company is, the ERC is calculated differently.

  • Business use FTEs to measure performance, plan labor, and for certain regulations under the ACA.
  • Moreover, in the cases of companies with a large number of part-time employees, the FTE helps to know how many part-time employees are equal to full-time employees.
  • Meanwhile, finance teams use this information when planning financial forecasts and determining revenue and profits per employee.
  • In contrast, non-exempt positions who typically work only 28 hours per week on a 0.75 FTE schedule do not qualify, even if the employer policy defines them as full-time.
  • That said, there are limitations to this calculation method — for instance, employees may be unable to work more than 40 hours per week due to their company’s policies or other factors outside of the project itself.

In a 0.75 FTE position, an employee will typically work 75 percent of the hours of a full-time employee. If a working week is 40 hours over 5 days, a 0.75 FTE employee will work just 30 hours in that same period. Divide the total hours worked by all of your employees by the number of available full-time hours in a year . This gives you the total number of hours worked by all of your employees. Now, it’s important to note that this FTE result does not necessarily reflect actual FTE employees.

Calculating FTEs for Standard Accounting

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. It can refer to either one person’s work calculating full-time or numerous people doing the functions of one full-time employee. fte meaning The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours. If you’re offering health coverage to remote workers, there may be some additional considerations. FTE calculations are also important when determining eligibility for certain federal programs and benefits.

full time equivalent

You just need to add the total amount of hours worked by all of your employees and divide it by 40h. If your business has a 32- or 35-hour workweek, then multiply the number of employees by that amount instead of 40. Part-time employees are included as a fraction of one FTE based on how much they work. You can apply different methods for different classifications of employees, as long as you apply the method consistently within each classification. Once you have a total number of hours, divide by 2,080 and round down for your FTE. The baseline in order to qualify as 1.0 unit of a full-time employee is set at 40 hours, so a part-time employee that worked 20 hours would be marked as a 0.5 FTE.

Independent Contractor Taxes

With Clockify, you can easily track your cost rates per employee and then compare and contrast them with employee billable hourly rates. Finally, the third method is based on the weeks-worked equivalency. An employee with a regular budgeted assignment of 75% of a full-time job position has a 0.75 FTE.

  • Divide the total hours worked by all of your employees by the number of available full-time hours in a year .
  • This is just a gut feeling, but FTE allows you to put science behind that feeling.
  • COBRA allows employees, covered spouses, and dependents to temporarily continue their group health insurance coverage if they become ineligible for the plan provided by your business.
  • Peak inpatients are the highest number of inpatients at a given point in a typical 24-hour period.
  • Divide this total number by 40, and then round the total to the nearest tenth to get the total FTE.
  • Business owners can use 60% of the loan for payroll costs and 40% for non-payroll expenses (e.g., interest on mortgages, rent, and utilities).

Calculating the FTE may help you receive forgiveness regarding your student loan debt. In this particular case, your FTE must be 1.0 or 0.75 as the minimum requirement. A full-time employee who works 40 hours per week is equal to one FTE, and a part-time employee working 20 hours per week is equal to 0.5 FTE. To convert FTEs (full-time equivalents) to hours, you should multiply the number of FTEs by the number of hours per week that a full-time position requires.