What is FTE and How to Calculate + Free FTE Calculator

what is fte

Most of all, FTE aims to ensure the quality of the project deliverables is high-standard. With time, you also improve your project budgeting skills as you determine the budget based on the resources you’ll need to hire for the project. However, in an FTE model, you only hire people as per your project pipeline’s need — never having to assign work to employees just because you’ve employed them. Put this way, you’ll see that the FTE model helps with efficient resource allocation. The full-time equivalent model is great for organizations hiring resources based on the projects they take. Managing employees, time tracking, overtime, and time-off data in disparate systems is complicated.

what is fte

FTE or full-time equivalent is a tool to help you gauge the potential productivity of your business or company. Imagine that, with the same FTE, an employee can deliver 100 units, while another only delivers 30. In this case, the calculation may show that the first professional is overqualified for the position, whilst the other needs more training and development. In short, it is a crucial term that is important for HR specialists and accountants alike. As you will understand by the end of this article, there are plenty of situations in which knowing the meaning of FTE and how to calculate it can be quite useful. To see your employees’ FTEs, you can view their daily/weekly/monthly assignments in Clockify.

Importance and Benefits of FTE in Project Management

In this article, we’re going to break down the very concept of FTE and explain why it is so important in project management. Join BambooHR and League to explore how to go beyond wellness resolutions so your organization can reap all the benefits of a healthy workforce. When using FTE alongside fte meaning other performance metrics, it can be easier to understand per-employee costs and output in a large organization. Knowing your FTE number is also helpful for determining if your organization is eligible for certain benefits programs, such as the Small Business Health Options Program (SHOP).

To identify the FTE of part-time employees, divide the total hours worked by part-time employees by the annual hours worked by one full-time employee (i.e., 2,080 hours). First, you need to account for the hours of a full-time weekly schedule and the actual employee hours they would be scheduled to work. If it’s a 40 hour week, each employee that works 40 hours per week is equal to 1.0 FTE. FTE refers to calculating the number of hours instead of the number of employees to forecast costs based on a full-time workweek. A full-time employee can be defined by a 40-hour workweek, 8-hours per day, 5 days per week. Instead, it focuses on the number of people working on your projects, whether they are full time employees, part time employees, contractors, interns, students, freelancers, advisors, etc.

Step #3: Sum Hours Worked

You’re able to establish all of your personnel requirements by calculating FTE. 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. Based on the skill assessment, you go through your resource inventory to assign work to employees that have the right skills needed for the project. In case you don’t have the skills you need for the project in-house, you hire more people. What’s more, measuring your FTE is an excellent help in project planning as it helps estimate how many hours of work go into a project.

what is fte

You can also use an FTE calculation to determine the appropriate pay for part-time workers. To identify the FTE for a specific part-time position, just divide the number of hours worked by the employee by the number of hours considered for a full-time worker. 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 your business considers 40 hours to be a full-time workweek, then an employee working 40 hours per week would have an FTE of 1.0. In contrast, a part-time employee working only 20 hours per week would have an FTE of 0.5—which shows that their hours worked are equivalent to half of a full-time employee. When used for ACA purposes, FTE is a very specific term used to calculate whether a company is required to provide benefits, for example.

What Does FTE Stand for?

Three of them work full-time (40 hours per week respectively) and the rest work 10 and 5 hours in total. In the context of the Health Care Reform Act, the Affordable Health Care Act requires the calculations that determine whether a business is classified as owned by a large employer or a small business. These calculations are used to clarify the company’s obligations regarding employee health benefits. As evident, once you have the total number of hours https://www.bookstime.com/articles/bookkeeping-for-franchises-the-complete-guide per day, you’ll be able to pick whatever days/employees ratio you want to carry out the estimated workload. However, bear in mind that this only applies to positions that work 30 hours per week when assigned a 0.75 FTE position, i.e., the IRS minimum for a full-time definition. 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.

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