Whether they’re full-time, part-time, or temporary, it quantifies the workforce in terms of full-time work hours. In many ways, labor costs represent one of the largest expenses for a business. By converting every employee’s hours into a standard full-time metric, FTE sheds light on how staffing changes affect the bottom line. Whether you’re weighing up new hires or exploring cost-saving measures, FTE metrics offer tangible https://www.bookstime.com/ data points to guide decisions. We will also show where FTE ties into modern solutions like employee scheduling apps and how it aligns with strategic initiatives like workforce scheduling.
Resource Management
Multiply 2,080 by three to calculate the annual number of hours worked by all three employees. Calculating FTE also makes it easier to assign employees to departments based on workload. Once a department manager reviews their needs and current staffing levels, they can request additional FTEs to help with time-sensitive projects. It will be able to employ 150 payroll personnel and might employ a few part-time employees. This is used to describe, calculate, and compare total work hours for a business.
Workforce Capacity Planning
These metric is particularly important when companies are comparing themselves with industry averages or with close competitors. In summary, understanding the meaning of FTEs is a key competency for HR professionals today. Knowing how to accurately calculate and strategically apply FTE analysis helps optimize staffing, forecast budgets, align https://showmewellenpark.com/understand-the-expanded-accounting-equation/ talent strategy to business goals, and support employee retention. FTE meaning “full-time equivalent,” is a way to count and compare work hours.
Create a list of employees and the number of hours worked during the year
- When tallying up hours worked, things like paid time off (PTO) and sick leave are included.
- FTE full-time equivalent can be used for planning upcoming projects and the total number of people to be scheduled for these tasks, both full-time or part-time.
- One of the most common yet often perplexing compliance concerns HR teams encounter is calculating FTE, or full-time equivalency.
- Trends in this ratio can show which teams are operating efficiently and which may be over or understaffed relative to output.
- For example, if full-time employees work 40 hours per week, four employees working 10 hours per week would be equivalent to one full-time team member, or 1.0 FTE.
Rounded to the nearest hundredth, the total FTE for part-time employees is 1.41. Now that we have taken a look at the FTE explanation, let us understand the difference between full-time equivalent (FTE), headcount, and work hours. In this example, Sarah’s FTE is 0.75, indicating that she contributes the equivalent of 0.75 full-time employees to your workforce. This rate is known as the affordability threshold and is typically adjusted every year to account for changes in market conditions, healthcare premium growth, and the American economy. In short, full-time equivalency (FTE) represents an employee’s total hours worked divided by the number of compensable hours in a full-time schedule during a fiscal year. Understanding FTE also streamlines collaboration between HR and other department managers, ensuring that staffing aligns with productivity goals and financial capabilities.
Under normal fte acronym circumstances, a full-time employee works 8 hours a day for 5 days a week. That would mean that a full-time employee would work an approximate of 40 hours a week and 160 hours a month. If your company uses a 40-hour workweek, multiply 40 by 52 to get the standard number of full-time hours worked each year (2,080). Other companies may adjust if they use standard schedules such as 35 hours per week. Many organizations use a 40-hour workweek, but it depends on your location and policies.
- Both of these crucial terms are fundamental, yet they serve distinct purposes and provide different insights into your organization’s human resources.
- Discover the simplicity of BrynQ’s intelligent data integration and unlock the power of informed decision-making.
- By using FTE as a key metric, organizations in most industries can make data-driven decisions that support operational efficiency and legal compliance.
- It enables comprehensive planning, budgeting, and allocation of resources while ensuring compliance with relevant labor laws.
- Some employers create paystubs records that link scheduled hours and FTE status to gross pay.
