Full Time Equivalent FTE Definition, How to Calculate, Importance

fte meaning

A recent project took 20 hours less than anticipated, so you need to adjust your staffing levels accordingly. You can calculate the FTEs required for the project by estimating how many hours each task will take and then adding them all up. In this comprehensive guide, we explore the significance of FTE in the business world by providing insights into its calculation, strategic benefits, drawbacks, and the best tools for tracking it all. Our goal is to present a thorough understanding of FTEs and highlight how they shape the path toward business success. Let’s jump in and decode the world of FTEs and their powerful influence on businesses. Yearly, a company generally considers an FTE to be valued at 2,080 hours.

fte meaning

But, in many situations, a business needs to view or report its staffing level in terms of full-time work. SAVIOM has over 20 years of experience helping multinational clients manage their resources efficiently and effectively. This Australian-based MNC has a global presence across 50 countries and has helped 100+ clients meet their specific business goals.

Enterprise Project Portfolio Management (EPPM)

So, when you implement this unified measure, you need to draw up a clear project plan in advance and allocate resources accordingly. Manually calculating and then recalculating your FTE can lead to errors and discrepancies in data, this is why it is a good idea to use workforce planning tools and automate this process from the very beginning. This distinction is needed because a 40-hour work week is common, yet it is not universal. At some companies and in some countries, a 36-hour work week is also a viable option so for them, 36 hours of work equal 100% or 1.0 FTE. You can adjust and diversify the calculations based on the project’s scope and requirements, scaling up or down as necessary. For all intents and purposes, your business requires 4.25 employees to function.

Hours keep your bills precise, without letting any worked hours go to waste. When resources log the exact number of hours they worked on a project, you can compare the booked hours vs. the actual time taken. This will help you act proactively and take corrective measures ahead of time. FTE, or full-time equivalent, is a unit of time defined to measure the workload, availability, or capacity of an employee.

What does FTE stand for?

Full-time equivalent (FTE) is calculated by dividing an employee’s scheduled hours by the company’s work scheduled hours on a weekly full-time basis. As you can see from the example above, you can easily calculate how many full-time equivalent employees you need to hire to successfully complete a project. All you need to do is enter how many hours of work are required to complete the whole project (estimated time), and then how many hours a day https://www.apzomedia.com/bookkeeping-startups-perfect-way-boost-financial-planning/ your employees will work on that specific project. The calculation is straightforward — divide the employee’s scheduled hours by the number of hours that represent an official weekly full-time schedule in a company (e.g., 40 hours per week). To calculate Sarah’s FTE, we need to divide her hours worked (28) by the number of hours worked by full-time employees (40). This gives us a figure of 0.7, which means that Sarah is equivalent to 0.7 FTEs.

  • So, when you implement this unified measure, you need to draw up a clear project plan in advance and allocate resources accordingly.
  • Determining the amount of workers in your organization and the amount of time they work is crucial for budgeting, benefits administration and legal purposes.
  • That said, full-time equivalent (FTE) is a metric used to determine the total number of full-time workers that you have in an entire organization.
  • It can also do the same for a full-time employee who hasn’t completed a whole year of work yet.
  • Now that we’ve got that out of the way let’s look at how to calculate FTE.

With Time Analytics, you can also set up reminders for employees to submit their timesheets on time and get an overview of their hours worked. As you can see, because the project only took 100 hours, you have one FTE left over. This tells you that, bookkeeping for startups when allocating resources for future projects, you can reduce the number of FTEs by one and still have enough workforce to complete the project. Imagine you are a human capital manager who has lost four employees and needs to replace their hours.