Calculate FTE

FTE stand for full-time equivalent and it represents the number of working hours that one full-time employee completes during a fixed time period, such as one month or one year. FTE converts workload hours into the number of people required to complete that work, which can help to simplify scheduling. FTE also helps budget analysts and project managers estimate the cost of labor. Managers may also benefit from looking at FTE to determine if overtime costs are making it worthwhile to open up a new full-time or part-time position.

Steps

Calculating FTEs

1. Find the hours worked by part-time employees. Use accounting records to identify hours worked by part-time employees. This is applicable for companies that employ both full-time and part-time workers.
   • Multiply the total weekly hours by the number of weeks each part-time employee has worked. Example:
     • 1 Part-time Employee worked 15 hours every week for 30 weeks: 1 x 15 x 30 = 450 hours
     • 2 Part-time Employees worked 20 hours for 40 weeks each: 2 x 20 x 40 = 1600 hours
   • Add the results together to obtain their total hours.
     • Example: 450 + 1600 = 2,050 part-time hours
2. Compute the number of hours worked by full-time employees per period. A full-time employee is someone who works a maximum of 40 hours (30 hours minimum) every week for over 120 days every year.
   • Multiply the number of workers by 40 (8 hours a day x 5 days a week).
     • Example: 6 full time workers: 6 x 40 = 240 hours
   • Multiply the result by 52 (weeks in a year).
     • Example: 240 x 52 = 12,480 full-time hours
3. Combine the hours worked by full-time and part-time employees. This is the total number of hours worked by all the employees.
   • Example: 12,480 (full-time) + 1600 (part-time) = 14,080 total hours
4. Divide the total hours worked by the number of full-time hours. This will determine the FTE of the company for a particular period.
   • Holiday hours and other paid leave (sick leave, maternity/paternity leave, etc.) are already accounted for as part of the hours worked. So you don’t need to make any special calculations for these hours.
   • Divide the total hours by 2,080. This number is a fixed number that is arrived at by the following equation: 8 hours a day x 5 days a week x 52 weeks a year. This final step will help you to calculate your yearly FTE.
     • Example: 14,080 total hours ÷2080 = 6.769 FTEs
   • Divide the total hours by 173.33 to find the FTE per month.
     • Example: 4,000 hours for February ÷173.33 = 23.07 FTEs
   • Divide the total hours by 8 to obtain FTE per day.
     • Example: 80 daily hours ÷ 8 = 10 FTEs

Using Online FTE Calculators

1. Locate an online FTE calculator. These online tools allow you to simply enter in the number of full-time employees you have and the hours worked every week by part-time employees. Then the online tool will do the calculating for you to give you an estimated FTE value. Reputable calculators can be found at https://www.healthcare.gov/shop-calculators-fte/ and http://www.healthlawguideforbusiness.org/fte-calculator.
2. Locate your worker data. You will need both your total number of full-time employees and the hours worked by your part-time employees. This information should be readily available in your accounting records. Remember that full-time employees are those who work more than 30 hours per week.
3. Input your data. Enter your employee data into the calculator in the relevant fields. Be sure to check whether the hours worked are entered on a weekly, monthly, or annual basis and edit your data appropriately. Double-check your information before pressing "calculate" to make sure that it is correct.
4. Use this FTE calculation as an estimate only. Keep in mind that the calculation you get from the FTE calculator tool is just an estimate. You can use this number for roughly estimating FTE values for yourself for guidance or educational purposes. But these calculations should never be used as a replacement for legal or tax advice from a professional in the field. And when you need a 100% accurate calculation for business reasons, you’ll need to use a different method.

Obtaining and Using Professional FTE Calculations

1. Pay a tax professional to calculate your company’s FTE for you. Calculating FTE is an important thing that you need to make sure gets done correctly. If you make a mistake in your calculations, it can negatively impact many aspects of your business including anticipating profits, taxes, and other issues. So if you don’t feel confident in your ability to calculate your business’s FTE perfectly, pay an accountant with experience in this field to do it for you.
   • You will need to provide this person with important information about your business so that they can gather all the information they’ll need to calculate your FTE.
   • They will need access to your employee files, previous tax documents, and other similar types of documents.
2. Request help from a legal professional. Certain types of lawyers will have experience in this area and will be able to help you with your calculations to ensure they are done correctly. Seek out advice from corporate or tax lawyers for help calculating your FTE.
3. Use FTE to calculate business metrics. FTE analysis can be a useful tool for assessing how many employees are needed in a certain part of a business or in total. Business owners can also track how overall employee growth has trended over the years in a clearer way by analyzing FTE changes. FTEs can be compared to other metrics to assess how much additional employees contribute to the business's profitability or revenues.
   • If your business uses part-time employees, you might want to convert their hours worked into full-time equivalents.
   • You can also use FTE to compare headcount to revenues or square footage, which may be useful for making decisions about budgeting and hiring/laying off.
4. Calculate FTE for health insurance. One use of FTE is in calculating the size of a small business for health insurance purposes. Specifically, the Small Business Health Options Program (SHOP) marketplace requires that business have fewer than 50 FTEs to qualify. This program offers affordable and high-quality employee insurance policies to business owners. Businesses also have to meet other standards to qualify.
5. Use FTE to calculate student enrollment. FTE is also used to mean "full time equivalent enrollment" and is used by universities and other educational institutions in a similar fashion to track enrollment of full and part-time students. Rather than work hours, class hours are used, with full-time students being those with a full credit load (often 12 hours per week) and part-time students being those taking fewer than 12. However, other schools may use different credit hour calculations for FTE.

Tips

• FTEs do not indicate the number of employees. The value of an FTE is constant over time, except when the company modifies its regular staffing pattern.

Sources and Citations

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