How to calculate FTEs

The hours worked per day, week, or month are compared to what these same units are for full-time employment, and the subsequent calculations reflect them. Create a list of each employee and how many hours they worked in the year. Make separate lists for full-time and non-full-time employees to simplify later calculations. Additionally, FTE calculations give you a better sense of your current staffing levels so that you can plan and budget accordingly. Using time tracking software, like Homebase, will allow you to run a historical report based on employee work history and status to gather the average hours worked using custom fields.

When you are determining FTE, it’s important to know what a full-time workweek means to your company. Once all employee hours are accounted for, you can complete this step by adding all the hours worked for the week. In human resources, the terminology full-time equivalent is used as a unit of measure showing how many employees an organization has or a project requires, assuming all employees work a full-time schedule. Federal taxes/tax withholdings State taxes Social Security 401 contributions Workers compensationDifferent states and countries collect different taxes and deductions.

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Businesses can pay their workers on a specific day of the week, regardless of the date. In another variation of the weekly pay, businesses can provide payroll on a specific day every two weeks. Semi-monthly pay is the most common payroll schedule used in most countries. Lastly, employers can provide employee wages every month on a specific date.Pay schedules are usually affected by an organization’s practice and the legal compliances for pay frequencies in a certain location.

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• It’s a simple calculation to make and you just need to know your employee details and go from there.
• Once you have a total number of hours, divide by 2,080 and round down for your FTE.
• However, if the employee worked 30 hours and was paid $30 per hour per this wage agreement, they would only make $900 because their hourly rate doesn’t change.
• She received her CPA from the Accountancy Board of Ohio in 1994 and has a BS in Business Administration/Accounting.

From there, if your full-time hours are 40 per week, divide the number by 2,080. If your total full-time hours are 30 per week, divide the number by 1,560. This will give you your total FTE for all full- and part-time employees for the year. You can use the FTE total each week, month, or year to determine company growth. You can also use the FTE total to remain compliant with federal, state, and local labor laws that may be based on employer size such as mandatory sick time laws.

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The Paycheck Protection Program is a Small Business Administration program to help employers retain employees during the public health and economic crisis. The number of full-time equivalent employees is used to determine the amount of loan forgiveness for borrowers.

FTE is also calculated to see whether or not you qualify for any tax credits. For https://www.bookstime.com/ example, an employee who works a full-time, 40-hour week would equal 1.0 FTE.

Importance of Calculating FTEs

When added together, the hours of your three part-time employees equal 80 hours. For the purpose of our calculations, we’ll assume that the sample company considers 40 hours per week full-time employment.

If the company has part-time employees, this helps determine if their working hours add up to the same number of a full-time staff’s total weekly hours. Full-time employees usually work 40 hours each week for over 120 days a year, but it also includes anyone who works more than 30 hours weekly. Add all of the hours from full-time workers together to use for your fte meaning calculation. When you calculate FTE, you can find the costs of time, personnel, and money to determine staffing decisions. It’s used by businesses to figure out how many full-time or part-time employees are in a company and for organizing projects. It’s an important element to accounting to determine employee wages, hours of service, and your company’s expenses.

Who qualifies as an FTE employee?

To determine your eligibility for the small-business tax credit, you’ll need to use a different system for counting FTEs. First, count the total number of employees who worked at your company at any time during the year, both full-time and part-time. It is sometimes useful to know how the total number of full-time and part-time employees are working in a business. But, in many situations, a business needs to view or report its staffing level in terms of full-time work. Although most businesses consider 40 hours a week and 160 hours per month full-time employment, according to the IRS, 30 hours a week and 130 hours per month are enough. In some cases, employers consider 37.5 hours a full-time work week because they don’t include the 30-minute mandatory daily break.

• The following example will help you understand the concept of FTE in terms of total hours worked for all employees and the time they worked.
• Thus FTE, termed Full-Time Equivalent is a unit that represents the total hours worked by a full-time employee on a regular basis.
• For instance, if your full-time workweek is 40 hours and you have two part-time employees who work 20 hours each week, when their hours are added together, they create one FTE.
• The concept is also useful for comparing headcount levels among the firms within an industry, as part of an industry analysis.
• Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.
• Your FTE number is also an important factor in determining if you’re considered an applicable large employer.

One whole FTE unit is 1.0, which can be made up of a single person or multiple employees. Let’s say a full-time measurement for your company is 40 hours per workweek. A single full-time employee could fulfill all 100 percent of this unit, or eight employees working five hours per week could. The same is true for a 0.5 unit — it can be made of one part-time employee working for 20 hours or four employees working five hours. It’s unlikely that you only employ full-time employees in your company — you likely receive help from part-time employees or temporary workers. The full-time equivalency measurement lets you calculate the hours those employees work compared to a full-time workload.

How payroll is processedThe payroll process nowadays usually involves utilizing payroll software for more efficient and accurate handling. Yet, most small business owners still handle their payroll functions manually, especially when they are starting. Outsource Accelerator connects you with payroll firms that have extensive experience with the regulatory framework in the US and have a proven track record in accuracy and timeliness in payroll delivery. We make it easier for clients to learn about, and engage with payroll outsourcing. Outsourcing payroll servicesOne of the more popular outsourced functions is the payroll process. Because of the importance of having an efficient payroll, companies that can afford to do so tend to outsource it to dedicated professionals.