Glossary of Human Resources Management and Employee Benefit Terms
Full-time equivalent (FTE) is a way for employers to standardize their headcount and combine their part-time workers’ hours to figure out how many full-time employees would work those hours. Making strategic decisions based on FTEs instead of actual employee headcount allows companies to simplify the payroll complexity of a multi-status workforce (full, part-time, and contract workers) and make more accurate budgeting forecasts.
Organizations can convert part-time and contract employee hours into FTE unit employees by adding together total hours worked and dividing the total by whatever is considered full time at the company. A typical U.S. company will likely adhere to the standard 40-hour workweek: eight hours per day, five days per week, but that isn’t universal, so adjust your FTE calculation accordingly.
For example, if a part-time employee works for 26 hours one week, their FTE value would be 0.65 (26 hours worked / 40 hours). And if an employee works a full 40-hour week, their FTE value would be 1.0 (40 hours worked / 40 hours).
This calculation provides a convenient way to quantify how many theoretically “whole” full-time employees are on the company payroll, even if the majority of your workforce is actually part time.
For example, if two part-time employees each work four hours per day for 10ten days apiece during a weekly pay period, their 40-hour combined total represents 1.0one FTE on the company’s payroll for that pay period.
What Does FTE 100% Mean?
FTE 100% is the same as seeing an FTE value of 1.0. Seeing a value of FTE 100% means a single full-time employee or multiple part-time employees work those full-time hours.
How Do You Convert FTE to Hours?
To convert an employee’s full-time equivalency into standard hours, multiply their FTE rate by 40. For example, if an employee has an FTE of 0.80, multiplying that number by 40 means that an employee works 32 hours a week.
What Is FTE Salary?
HR departments use FTE salaries to determine part-time workers’ salary compensation. A part-time employee’s FTE salary is calculated by multiplying their FTE value by the salary allotted to an equivalent full-time employee. Say a full-time graphic designer at a company makes 48,000 dollars a year, amounting to around 923 dollars for each workweek. Meanwhile, a part-time or contract graphic designer at the same company works 22 hours per week. Multiplied by 40, this comes to an FTE value of 0.55. Now to figure out their FTE salary, simply multiply their FTE by the full-time employee’s yearly and weekly salary. Our part-time employee’s annual FTE salary would be 26,400 dollars and their weekly pay would be 507 dollars.
What Is the Difference Between FTE and Headcount?
Headcount refers to how many people your company employs. Calculating headcount is as simple as adding up your employees, while FTE refers to the number of full-time hours being worked at the company.
Let’s say you have 100 employees, but 18 of those employees are part-time and only work 10 hours a week. Altogether, those 18 employees only account for the hours of four and half full-time employees. Therefore, your company’s FTE would be 86. (82 full-time employees + 4.5 FTE for the part-time employees).
Converting the hours worked by a multi-status workforce into FTE employees makes it easier for an organization to analyze performance, both internally and compared to competitors. For example, many companies use FTE to compare the overall performance of part-time staff to that of actual full-time employees when budgeting for
For example, comparing the two groups over time allows an organization to find opportunities to improve efficiency when hiring seasonally or when making part-time and full-time staffing decisions.
After all, the net costs of hiring additional part-time employees may in fact be lower than he more visible cost of overtime pay for existing staff, and FTE is used to uncover such findings.
When using FTE alongside other performance metrics, it can become easier to understand per-employee costs and output in a large organization.