The meaning of FTE: a guide for HR professionals Workable

We’ll be happy to explain how to determine FTE for different contract types and give you tips on how to prevent errors. Headcount refers to the number of individual employees.FTE measures the total workload those employees represent. In the United Kingdom, the term FTE (or sometimes WTE – Whole Time Equivalent) is commonly used in both the public and private sectors. The definition of full-time can vary by industry, often ranging between 35 and 40 hours per week. Companies that utilize full-time equivalent make smart decisions about hiring, benefits, and compliance. Calculating FTE can be crucial to an organization’s overall health and success.

Why the FTE calculation is important

A full-time employee is considered to work at least 30 hours per week on average. The total hours worked is the sum of the number of hours worked by part-time and full-time employees, whereas the number of available full-time hours in a year is most frequently 2,080. Understanding the distinction between FTE and headcount is essential for strategic workforce planning and achieving your business objectives. While these terms are often used interchangeably, they represent fundamentally different metrics that provide unique insights into your organization’s human capital. Let’s walk through a practical scenario to demonstrate how to calculate FTE for your payroll and staffing decisions. Consider a tech startup with the following team structure where the standard full-time schedule is 40 hours per week.

And while different types of workers help fulfill workforce needs, it makes labor forecasting and compliance with tax and labor laws a challenge. It is then important to note that some FTE calculations do involve a fair amount of assumptions. For example, some governments may simplify the process by assuming each part-time worker to be 0.5 FTE, regardless of the hours they work. Some may even assume any employees who work more than 20 hours a week to be 1 FTE.

How do HR teams use FTE?

So, in this case, you would add up all employee hours for the year and divide by 2,080. If your company considers 35 hours full-time, then you would adjust your calculation accordingly. Your total FTE count becomes 4.25, giving you a clear meaning of your actual workforce capacity. This calculation helps you compare staffing levels across departments and make informed decisions about whether to hire additional full-time staff or adjust existing schedules. FTE is a designation given to a combination of employees who individually do not have full-time status, but are equivalent to a full-time employee when grouped together.

HR can use FTE calculations to allocate headcount to different departments or projects based on workload and priorities. HR teams primarily use full-time-equivalent (FTE) to make informed decisions when undergoing strategic workforce planning, budgeting, and resource management. More importantly, many government support programs use FTE as a basis to decide how your company should be treated.

Therefore, before making a decision using the FTE metric, it is best to check if there are any rules or requirements worth considering. Full-time equivalent is a measure that shows how many full-time equivalent employees a certain company employs. This helps you compare and analyse the amount of work being done, even if your employees work odd hours. In summary, understanding the meaning of FTEs is a key competency for HR professionals today.

• A full-time employee is considered to work at least 30 hours per week on average.
• A full-time equivalent (FTE) is a standardized measurement that converts the number of hours worked by all employees into the equivalent number of full-time positions.
• The ACA requires that employers add all of the hours worked by part-time employees in a month and divide by 120.
• Do not include 1099 contractors; they are not considered employees.
• 50% FTE means that an employer’s non-full-time employees collectively worked 60 hours in one month.
• Employees considered full-time equivalent employees work a standard, full workload weekly, governed by local law.

FTE in employment law

• It helps organisations allocate resources effectively, manage workload distribution and maintain productivity.
• It comes in the form of a tax credit worth half of employee wages over the course of a covered period.
• A 120-hour project would take three full-time equivalent employees for one week.
• FTE allows HR to compare workloads and staffing levels across a company’s units or departments, ensuring equitable distribution of resources.

While headcount planning can help HR work with managers and business leaders to build and scale the organization’s workforce, it does have some limitations. Full-time equivalent students8 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. An employee who works full-time might get 2 weeks’ vacation, while a 0.5 FTE would get about 1 week.

Healthcare

Employers are encouraged to consult with legal counsel for advice regarding their organization’s compliance with applicable laws. Headcount is simple to calculate, whether you want to determine the number of people in a particular department or over a set period (monthly, quarterly, annually). Here is a comparison table showing FTE values from 0.1 to 1.0, with corresponding weekly hours. It also shows the effect on pay, assuming full-time is $50,000 per year.

The use of FTE plays an important role in staff planning and helps companies to optimally organize their staffing. By understanding and applying FTE properly, you can deploy your staff more effectively and budget better. Overtime increases the number of hours worked, which can increase your FTE. Leave, such as vacations or sick leave, reduces hours worked and can lower the FTE. Keep this in mind when calculating the FTE to get a realistic picture of work capacity. By calculating metrics like revenue per FTE or output per FTE, companies can measure and compare productivity across departments and time periods.

Others may use 35 or even 30 hours as the benchmark for full-time. The list should include the employee’s name and the number of hours they work per week. Make sure to exclude time allotted for paid leave and sick leave. Do not include 1099 contractors; they are not considered employees. 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? Five of them work full-time (40 hours per week), three occupy a part-time position each working 20 hours a week, and the other two each work 10 hours per week.

Consequently, the FTE for a part-time employee working 20 hours a week would be 0.5. There is a strong relationship between your staff’s FTE and your company’s efficiency. By optimizing FTE, you can better distribute the workload and ensure that employees can do their work more efficiently. Too many staff can lead to inefficiency and higher costs, while too few can result in overload and lower productivity. Part-time employees often receive prorated salaries and benefits based on their FTE value. For example, an employee working at 0.5 FTE may earn half the salary and receive half the benefits of a full-time colleague.

Getting to know the small details of your workforce is a game-changer for success in your company’s operations. A key metric in this analysis is the Full-Time Equivalent (FTE), which helps estimate how many part-time employees—or interns, for that matter—equal a full-time employee. Often overlooked, FTE provides value-added perspectives into staffing levels, budgeting, and overall workforce planning. Some labor laws and employee benefit programs are linked to how many employees a company has on its payroll. To ensure that a company with 100 part-time employees is treated as fairly as one with 50 full-time employees, an FTE is calculated to compare both workforces.

For example, if a full-time work week is 40 hours and someone works 20 hours, that person counts as 0.5 FTE. FTE enables HR teams to analyze workloads, allocate resources efficiently, and make staffing decisions based on actual labor capacity rather than just headcount. Understanding and calculating FTE is crucial for HR managers to improve organisational efficiency and make informed decisions. FTE provides a standardised way to measure workforce size, allocate resources effectively, and manage workload distribution. FTE plays a key role in HR decision-making, such as optimising headcount, managing labour costs and ensuring compliance with employment laws. FTE also plays a role in making informed decisions about promotions, dismissals and training programs.

And don’t forget to check out our dedicated Paycheck Protection Program Loan Calculator. This means the combined work effort of all employees is equivalent to 12 full-time employees. Keep in mind that some laws, including the ACA, require employers to use specific calculations to determine the number of FTEEs. The key thing to remember with headcount is that it is one metric, and in isolation, does not provide a clear, accurate picture of what’s going on in a business. This is why HR must combine headcount with other metrics, such as FTE, and use headcount analysis to gain more insightful data. A metric shows the difference between two or more numbers, while analysis shows us why something is happening, along with the impact.

Step 1. List all of your employees and hours worked

When tallying up hours worked, things like fte employee meaning paid time off (PTO) and sick leave are included. However, external contractors and freelancers are generally not included in the FTE count. You may need to combine multiple systems to track more complicated metrics. Select relevant KPIs that are connected to business goals and set a target score for each KPI. Identify key areas where analytics will help you solve problems and meet goals that add value to the organization from a business perspective. Following analysis, the results from your HR data can be implemented to create value for your organization.