How to Calculate FTE: Full-Time Equivalent Formulas & More

This determines how much money a company should allocate to pay the researcher. Companies use several corporate staff metrics for better planning, resourcing, and capacity decisions. Comparing fte meaning the full-time equivalent to these other methods helps understand when one metric can be better. Proof of FTE is evidence required for Paycheck Provider Program (PPP) Loan Forgiveness.

That’s where FTE comes in because you can use the FTE calculation to assign a certain number of employees to departments within an organization, depending on each respective department’s work needs. FTE can serve as a parameter for your decision-making as a manager regarding promotions, dismissals, division of tasks, training and talent development. Through this, you can identify the needs and internal capabilities of your employees more easily, as well as exercise more strategic management. Within this method, the employee is credited with 8 hours for each day they would be required to work at least 1 hour (including PTO). Within this method, you add up all actual hours worked (including PTO). To help you determine if you are eligible for a small-employer healthcare tax credit, you need to count the number of employees employed in your company throughout the year.

Benefits of FTE

And we’re all trying to show that the tools we use actually have an effect on productivity. FTE offers a standardized yardstick that allows companies to evaluate productivity and effectiveness between departments, teams, or time frames. In the complex interplay between managing https://www.bookstime.com/ a workforce and achieving optimal productivity, Full-Time Equivalency (FTE) is an integral measurement. Imagine having the power to precisely gauge your employees’ workload, enabling you to staff teams efficiently, allocate resources judiciously, and optimize your budget.

However, the IRS mandates only 30 hours per week or 130 hours per month for an employee in the US to be considered full-time in terms of the type of employment. Considering that the FTE unit of measure is based on the total number of hours worked — it may not indicate the actual number of people working in a company. Full Time Equivalent (FTE) refers to the unit of measurement equivalent to an individual – worker or student – one unit of a work or school day, applicable in a variety of contexts. In most cases, full time equivalents measure an employee or student and/or their workload. In step 4, we learned that the total number of work hours for all employees in a single week equals 153. The list should contain the names of your employees as well as the full number of work hours for a single week.

Estimating resources for project planning

You can work out the Full-Time Equivalent by dividing an employee’s scheduled hours by the employer’s hours for a full-time workweek. To calculate FTEs and see if you qualify for tax credit, you can choose one of the said methods (we’ve provided calculators for each). If you, for instance, choose the first method, enter all the actual hours worked (including PTO) and divide that number with 2,080 to get the final FTE. In the context of the Health Care Reform Act, the Affordable Health Care Act requires the calculations that determine whether a business is classified as owned by a large employer or a small business. These calculations are used to clarify the company’s obligations regarding employee health benefits. To calculate the FTE for all employees in your company, consider the full-time and part-time employees you employ.

• If an employer has a 40-hour workweek, a worker scheduled for 40 hours per week is 1.0 FTE.
• How you define and measure productivity changes based on your job, so you’ll have to adjust your equation.
• If you need to understand workload capacity, resource allocation, or project needs, use an FTE calculation.
• It is critical for accounting purposes and determining wages, and for calculating the company’s expenses when paying its workers.
• Prior to joining the team at Forbes Advisor, Cassie was a Content Operations Manager and Copywriting Manager at Fit Small Business.

If a full-time developer works 40 hours per week, this translates to 200 FTE weeks (8,000 hours/40 hours/week). However, Full-time Equivalents or FTE in project management provide a common language for discussing progress, workload, and other resource management needs. This method can tell you how much is being produced each quarter but doesn’t factor in the quality of those products. While it works well for straightforward productivity calculations, other instances may require an alternative approach with more nuanced factors like employee feedback or desired outcomes. Learn how to calculate productivity effectively with this step-by-step guide, including 5 different productivity formulas and methods to choose from.