Step 3: Sum Up All the Work Hours
The next thing you should do is add up all the work hours of your full-time employees. Here’s what we got in our case:
40 + 38 + 35 = 113
Now do this for your part-time employees:
28 + 12 = 40
Step 4: Discover the Total Number of Work Hours per Week
What follows is adding up the total work hours per single week of both part-time and full-time employees. With the numbers we’ve used, it will look something like this:
113 + 40 = 153
153 is the total number of work hours within a single week. With this number, we can continue our calculation.
Step 5: Calculate the Ideal FTE
Before you can calculate your actual FTE, you need to discover the ideal FTE or the FTE where all the numbers are round, meaning all of your employees work the exact same number of hours based on the type of their employment (full or part-time).
To do that, we should start with the “ideal situation,” in which all your full-time employees work 40 hours a week, and all your part-time employees work 20 hours per week. To illustrate:
Work hours per week for 3 full-time employees: 3 x 40 = 120.
FTE for one full-time employee equals 1, for 3 employees, equals 3.
Work hours per week for 2 part-time employees: 2 x 20 = 40.
FTE for one part-time employee equals 0.5, for 2 employees, equals 1.
Add those numbers up, and you’ll arrive at your ideal FTE:
IFTE = 3 (for full-time) + 1 (for part-time) = 4;
The IFTE of 4 employees equals 160 work hours (assuming a regular work week has 40 hours).
You get the IFTE by dividing the total number of work hours for all employees by the regular number of work hours per week:
IFTE = 160 / 40 = 4
Step 6: Calculate Your FTE
So, with all the previous steps in mind, let’s calculate the actual FTE based on the specific numbers we’ve used.
In step 4, we learned that the total number of work hours for all employees in a single week equals 153.
To calculate your weekly FTE, based on the above figures, you should use the following formula: Total number of work hours / regular full-time work week = Weekly FTE
Or, in our case:
153 / 40 = 3.825
To calculate your monthly FTE, based on the above figures, you should use the following formula: Multiply the total number of work hours by the number of weeks in a single month:
153 x 4 = 612
Then, multiply the ideal number of work hours for one full-time employee per week by the number of weeks in one month:
40 x 4 = 160
Finally, divide the two numbers to get your monthly FTE:
612 / 160 = 3.825
Notice how the monthly and weekly FTE are the same. This is because, for the sake of convenience and to make it easier to explain, we assumed that the work hours for every week of the month are the same (meaning your employees put in 153 hours of work per week, 4 weeks in a row).
In reality, this probably won’t be the case, meaning the work hours per single week will be different, and the calculation will be closer to something like this:
Week 1 = 153 work hours
Week 2 = 155 work hours
Week 3 = 159 work hours
Week 4 = 160 work hours
In this case, to calculate your monthly FTE, you should first add the work hours for each week:
153 + 155 + 159 + 160 = 627
Next, divide the above number by the ideal number of work hours for a full-time employee per month.
627 / 160 = 3.91
To calculate your yearly FTE, you should calculate the work hours of all of your employees for that one year and divide that number by the ideal number of work hours per year for one full-time employee.
The number of annual work hours equals the number of work hours per week multiplied by the number of working weeks in a single year:
153 x 52 = 7,956
For a 40-hour working week, the ideal number of annual work hours for one full-time employee will be the total number of work hours per week times the number of weeks in one year:
40 x 52 = 2,080
Finally, divide the two numbers to calculate your yearly FTE:
7,956 / 2,080 = 3.8 FTE
As was the case with the monthly FTE, this equation presumes that all work weeks had a total of 153 work hours.
Why Is FTE Important?
There are numerous reasons why calculating FTE can prove meaningful to your company. By calculating your FTE, you’ll be able to get information on the overall productivity of all your employees (within a team, department, or entire company).
Understanding the meaning of FTE and knowing how to calculate it bring forth several common benefits:
Greater Performance Review
With FTE, you can get a clearer picture of how your employees are performing in their jobs. Instead of just focusing on how many employees you have working for you, you can get the actual number of work hours they are able to perform and, thus, get a better picture of your company's overall performance capabilities.
Planning New Projects Is Easier
Planning a new project and making estimates can be tiresome, especially when you have employees with different types of contracts (part-time, full-time, and freelancers) working for your company. FTE calculations make it easier for you to assign different personnel to different projects or specific tasks based on their overall performance and contribution to your company.
Comply With Federal Laws
Under the Affordable Care Act (ACA), Applicable Large Employers (ALE) who employ a minimum of 50 full-time employees (or have an FTE of at least 50) are obligated to provide their employees with the following:
- Provide certain employees (along with their dependents) a certain type of healthcare coverage;
- Periodically create reports on minimum healthcare insurance to both employees and the IRS;
Based on the FTE value, some of your employees could be eligible for minimum or affordable healthcare insurance. Knowing this will help you stay compliant with state and federal laws. Under ACA, any employee that works at least 30 hours per week, or 130 on a monthly basis, is entitled to some form of healthcare.
Control Costs and Budget Better
FTE is important for calculating labor costs incurred by your company. By determining your company's overall FTE, you can plan in advance and manage your payroll expenses. This will also help you ensure you are not over or understaffed.
What does “FTE of 100%” stand for?
Saying that FTE is equal to 100% is identical to saying that FTE is 1.
An FTE of 100% is equal to the amount of work one full-time employee performs within a given time period (a day, week, month, or year).
Now, the exact number of hours that a 100% FTE represents will depend on your company’s policies and the various labor laws in your state, country, and more.
- If a full-time employee is expected to work 40 hours per week, then an FTE of 100% (or FTE=1) will correspond to that number of work hours.
- If a full-time employee is expected to work 35 hours in a single workweek, then an FTE of 100% (FTE=1) will correspond to that number of work hours, etc.
In that same vein, you can calculate an FTE of 80%.
- If a full-time employee is expected to work 40 hours per week, then an FTE of 80% (or FTE=0.8) will be equal to 32 hours.
- If a full-time employee is expected to work 35 hours per week, then an FTE of 80% (or FTE=0.8) will be equal to 28.
And you can use the same principle to determine 50% FTE:
- If a full-time employee is expected to work 40 hours per week, an FTE of 50% (or FTE=0.5) will be equal to 20 hours.
- If a full-time employee is expected to work 35 hours per week, an FTE of 50% (or FTE=0.5) will be equal to 17.5.
How to calculate FTE for one employee?
To calculate the full-time equivalent in your company for each employee, you’ll need to account for the hours of a full-time weekly schedule and the actual hours your employees are scheduled to work.
To calculate FTE for one of your employees, you should take into account the following information:
- The ideal hours for a full-time employee (usually between 30-40 hours)
- The number of hours your employee is scheduled to work or has worked in a week.
For example, 40 hours is typically the exact number of hours a single employee should work in order to be classified as a full-time employee. Let’s say that the employee in question has worked 37 hours during the week. To calculate the FTE of that employee, you should divide the actual work hours by the ideal work hours for full-time employees:
FTE = 37 / 40 = 0.925; FTE = 0.925
- FTE gives businesses a clear overview of their current workforce capacity and manpower availability.
- By calculating the FTE, companies can more accurately evaluate the work performances of entire departments, teams, or individual employees. It also helps businesses create more accurate project cost and budget estimates.
- To comply with various federal laws, it’s important to accurately calculate the FTE of each employee.
- FTE allows businesses to determine the total number of full-time hours an individual, team, or entire company can invest in performing work duties during a specific period (weekly, monthly, or yearly).