What is a Full-Time Equivalent FTE? Definition Meaning Example

fte meaning business

A part-time graphic designer working 30 hours per week at that same company would have an FTE of 0.75 since they work 75% of that 40 hours. This way, you will be able to determine the number of full-time equivalent workers in your company even when you have part-time workers on-site. They also use it to calculate labor costs for the expected project workload and subsequently define the funds fte meaning business needed to finish a project. It is critical for accounting purposes and determining wages, and for calculating the company’s expenses when paying its workers. In terms of budget allocation, FTE is a valuable tool that can help in forecasting labor costs more accurately. By understanding the total FTE for a given period, managers can predict labor costs and allocate budgets more efficiently.

fte meaning business

A full-time employee can be defined by a 40-hour workweek, 8-hours per day, 5 days per week. The full-time employees work 40 hours per week and 52 weeks out of the year, meaning that the number of full-time hours worked on an annualized basis is 104,000 hours. The Affordable Care Act requires employers with 50 or more FTEs to offer healthcare benefits that line up with ACA standards. Additionally, you can use FTE to determine pay for part-time workers by simply multiplying a part-time employee’s FTE by the full-time salary for that same position. For example, if a full-time program coordinator makes $60,000 per year for 40 hours a week, a part-time employee working 25 hours per week in the same position (0.625 FTE) would make $37,500 per year.

Operating Income: Understanding its Significance in Business Finance

If you increase your opening hours and are open every day of the week, then you have a 0.875 FTE. If the trucks open at the same time, then you require two different people to run them. Such technology https://www.bookstime.com/ is already a part of many workplaces and will continue to shape the labor market and HR. Here’s how employers and employees can successfully manage generative AI and other AI-powered systems.

  • Reductions based on FTE might inadvertently result in the loss of multiple part-time positions instead of full-time roles.
  • By accurately understanding their FTE count, businesses can ease this complexity and better manage the regulatory landscape.
  • For instance, in the United States, the standard full-time hours per week is often considered to be 40, whereas in Europe it may fluctuate and average to around 35 hours per week.
  • If you’re concerned about staying compliant, consider software such as Homebase that will track your employee hours, provide reporting, and can also prepare your time sheets for payroll.
  • A full-time equivalent (FTE) is a unit of measurement used to figure out the number of full-time hours worked by all employees in a business.
  • If each of these workers works 40 hours per week, then you are already meeting the FTE requirement.

Suppose a company currently has 50 full-time employees on its payroll, along with 10 part-time employees. FTE, an abbreviation for “full time equivalent”, counts the approximate number of full-time employees employed by a specific company, but with the inclusion of part-time employees. In practice, FTE is measured by companies to estimate the number of full-time employees employed within a specific time frame.

What is FTE?

Full-Time Equivalent (FTE) plays a pivotal role in human resources (HR) management, helping HR professionals make data-driven decisions about staffing, recruitment, and workforce optimization. Managing employees, time tracking, overtime, and time-off data in disparate systems is complicated. Join us on this webinar case-study to see how Vimeo was able to leverage the BambooHR and Boomr integration to simplify their workforce management and streamline their processes. Full-time equivalent students[9] is one of the key metrics for measuring enrollment in colleges and universities. The measure is often annualized to cover the average annual full-time equivalent students and is designated by the acronym AAFTE.

A 100% FTE is the same as a 1.0 FTE — it may point to one person working a full-time schedule or several people fulfilling the duties of one full-time position. On the flip side, a spike in FTE levels without corresponding business growth may indicate a need to realign staffing plans and reduce hours. Tracking FTEs over time also allows HR to identify growing or decreasing expenditure on salary and benefits.

FTE (Full-Time Equivalent)

It’s used to determine the overall number of full-time hours that your team or business as a whole is able to perform or has performed during a certain period of time. In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees. With the required inputs in place, we can arrive at approximately 52.40 FTEs by dividing the total hours worked by all employees by the total number of available work hours in a year.

By considering a team’s total available labor hours through the FTE metric, managers can plan the workload more efficiently and effectively. The primary difference lies in the way these two metrics account for the workforce’s working hours. Headcount refers to the total number of employees in an organization, while FTE considers the total number of hours worked by employees. The number of hours worked by an employee can also substantially affect their work-life balance. For instance, if an employee feels that an FTE model systematically undervalues their contributions or productivity, it can negatively impact their overall satisfaction and loyalty to the company. Conversely, if the FTE model accurately calculates employees’ workload while considering their personal needs, it can enhance employees’ satisfaction levels.