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This article was co-written by Jill Newman, CPA. Jill Newman is a Certified Public Accountant (CPA) in Ohio with over 20 years of accounting experience. She received her CPA from the Ohio Board of Accountants in 1994 and holds a Bachelor of Business Administration/Accounting degree.
There are 10 references cited in this article that you can view at the bottom of the page.
This article has been viewed 14,236 times.
FTE, the abbreviation for Full-time equivalent, is the full-time equivalent, and this metric represents the number of hours of work completed by a full-time employee in a given period of time, such as like a month or a year. You can use the FTE number to convert the hours worked into the number of people needed to get the job done, to help simplify the planning process. FTE numbers also help budget analysts and project managers estimate labor costs. In addition, thanks to the FTE number, managers can also determine whether the cost of overtime is worth hiring new full-time or part-time employees.
Steps
Calculate FTE
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Find the number of hours worked by part-time employees. Use the bookkeeping to determine the number of hours worked by part-timers. This applies to companies employing both full-time and part-time employees. [1] X Research Source
- Multiply the total number of hours worked per week by the number of weeks worked by each part-time employee. Example :
- A part-time employee works 15 hours per week and for 30 weeks: 1 x 15 x 30 = 450 hours
- Two part-timers working 20 hours/week and for 40 weeks: 2 x 20 x 40 = 1600 hours
- Add up the results to get the total number of hours worked by part-timers.
- Example : 450 + 1600 = 2,050 hours of part-time work
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Calculate the number of hours worked by a full-time employee per period. A full-time employee is someone who works up to 40 hours (minimum 30 hours) per week for more than 120 days per year. [2] X Research Source
- Multiply the number of workers by 40 (8 hours a day x 5 days a week).
- Example : there are 6 full-time employees: 6 x 40 = 240 hours
- Multiply this result by 52 (the number of weeks in a year).
- Example : 240 x 52 = 12,480 full-time hours
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Add up all full-time and part-time hours. The result is the total number of hours worked by all employees. [3] X Trusted Source Internal Revenue Service Go to Source
- Example : 12,480 (full-time hours) + 1,600 (part-time hours) = 14,080 total hours worked
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Divide the total number of hours worked by the number of full-time hours. This calculation will help determine the company’s FTE number for a specific time period. [4] X Trusted Source Internal Revenue Service Go to Source
- Holidays and other forms of paid leave (sick leave, maternity leave, etc.) are included in the hours worked. So you don’t need to do any special calculations for these hours.
- Divide the total hours by 2,080. 2,080 is the fixed number obtained from the following equation: 8 hours of the day x 5 days of the week x 52 weeks of the year. This final step will help you calculate your annual FTE number. [5] X Trusted Source Internal Revenue Service Go to Source
- Example : 14,080 (total working hours) ÷2080 = 6,769 FTEs
- Divide the total number of hours worked by 173.33 to calculate the FTE per month.
- Example : 4,000 (working hours in February) ÷ 173.33 = 23.07 FTEs
- Divide the total number of hours worked by 8 to calculate the FTE per day.
- Example : 80 working hours daily 8 = 10 FTEs
Use an online FTE calculator
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Find an online FTE calculator. With the online calculator, you simply enter the number of full-time employees and the number of hours worked per week by part-timers. The online tool will then calculate and give you an estimated FTE value. A reputable FTE calculator can be found at https://www.healthcare.gov/shop-calculators-fte/ and http://www.healthlawguideforbusiness.org/fte-calculator.
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Find employee data. You need both data on the total number of full-time employees and the number of hours worked by part-time employees. This information is usually listed and kept in the accounting records. Note: Full-time employees are employees who work more than 30 hours per week. [6] X Research Sources
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Insert information. Enter employee data in the correct relevant field on the calculator. Be sure to check whether the hours entered are weekly, monthly or yearly and edit the data accordingly. Double-check your information before hitting the “calculate” button to make sure there are no mistakes.
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This calculation of FTE is an estimate only. Remember that the results you get from the FTE calculator are estimates only. You can use this number as a rough estimate of the FTE value for instructional or educational purposes. Of course, these calculations should never be used as a substitute for expert legal or tax advice in the field. And when you need 100% accurate calculations for business purposes, you need to use a different method. [7] X Research Sources
Use professional FTE calculation method
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Hire a tax professional to calculate the FTE for your company. Calculating the FTE is very important so you need to make sure you do it correctly. If there is an error in the calculation, it can negatively impact many aspects of the business, including profit forecasting, taxes and other issues. So, if you don’t feel confident in calculating the correct FTE number for your business, hire an accountant with extensive experience in this field to help you calculate it.
- If you hire an accountant, you’ll need to provide enough important information about your business so that the accountant has all the information needed to calculate the FTE.
- Accountants also need access to employee documents, previous tax documents, and other similar types of documents.
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Ask for help from a legal professional. Some attorneys with experience in this area can help you with the calculations to ensure accurate results. You should seek advice from a tax attorney to help calculate the FTE.
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Use FTE numbers to calculate business metrics. FTE analysis can be a useful tool for assessing the number of employees needed for part or all of an enterprise. Business owners can also track overall employee growth over the years in a more visible way by analyzing changes in FTE. You can also compare FTE with other metrics to gauge how additional employees contribute to your business’s bottom line or revenue. [8] X Research Sources
- If your business employs part-time employees, you should convert part-time hours into full-time equivalents.
- You can also use FTE to compare population with income or square feet (US-UK unit of measurement), which is useful for making budgeting decisions. and hire/fire.
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Calculate FTE for health insurance. Another application of FTE is calculating the size of a small business for health insurance purposes. Specifically, the Small Business Health Options Program (SHOP) requires businesses to have less than 50 FTEs to participate. This plan provides affordable and high-quality employee insurance policies for business owners. However, in addition to the FTE number, businesses must also meet other criteria to qualify. [9] X Research Source
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Use the FTE number to calculate student enrollment. FTE is also used as “full-time enrollment” for universities and other similar institutions to enroll full-time and part-time students. Instead of working hours, school hours are used, with full-time students being students with full credit (usually 12 hours per week) and part-time students being students studying less than 12 hours/week . However, different schools may have different requirements for the number of credit hours for calculating FTE. [10] X Research Source
Advice
- The FTE does not specify the number of employees. The value of an FTE will remain the same over time, except when the company revises its usual staffing model.
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This article was co-written by Jill Newman, CPA. Jill Newman is a Certified Public Accountant (CPA) in Ohio with over 20 years of accounting experience. She received her CPA from the Ohio Board of Accountants in 1994 and holds a Bachelor of Business Administration/Accounting degree.
There are 10 references cited in this article that you can view at the bottom of the page.
This article has been viewed 14,236 times.
FTE, the abbreviation for Full-time equivalent, is the full-time equivalent, and this metric represents the number of hours of work completed by a full-time employee in a given period of time, such as term like a month or a year. You can use the FTE number to convert the hours worked into the number of people needed to get the job done, to help simplify the planning process. FTE numbers also help budget analysts and project managers estimate labor costs. In addition, thanks to the FTE number, managers can also determine whether the cost of overtime is worth hiring new full-time or part-time employees.
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