With this FTE Calculator, you can quickly calculate how many full-time equivalent employees are on your team. As it helps you work out how many manhours of work are being done, FTE calculation is an important part of business planning.
In this article, we will not only explain to you the FTE meaning, but we will also provide examples, helping you fully understand how to calculate FTE for your company. Plus, you'll need to understand what FTE is and how to perform the FTE calculation if you want to apply for the Paycheck Protection Program (PPP) loan forgiveness program. Interested? Well, keep reading!
What is FTE? FTE meaning
Full-time equivalent is a measure that shows how many full-time equivalent employees a certain company employs. This helps you compare and analyse the amount of work being done, even if your employees work odd hours.
To understand the concept further, let's look at some examples. Assuming the official full-time schedule is 40 hours,
- 1 full-time employee working 40 hours per week = 1 full-time equivalent employee;
- 2 part-time employees working 20 hours per week = 1 full-time equivalent employee; and
- 4 part-time employees working 10 hours per week = 1 full-time equivalent employee.
How to calculate FTE?
Our FTE calculator allows you to calculate FTE in 4 simple steps. It applies the following procedure, which we explain through an example for a hypothetical company.
Imagine you own a company with 3 full-time employees and 5 part-time employees. What is the FTE of your company?
- Compute the total full-time working hours in a week
Total full-time working hours in a week = Number of full-time employees * Weekly working hours per full-time employee
Assuming all 3 full-time employees work 40 hours per week,
Total full-time working hours in a week = 3 * 40 = 120 hours.
- Compute total part-time working hours in a week
Total part-time working hours in a week = Number of part-time employees * Weekly working hours per part-time employee
Assuming, on average, the 5 part-time employees work 20 hours per week,
Total part-time working hours in a week = 5 * 20 = 100 hours.
- Compute total working hours in a week
After working out the full-time and part-time employee working hours,
Total working hours in a week can be determined by summing up
Total full-time working hours in a week and
Total part-time working hours in a week.
Total working hours in a week = Total full-time working hours in a week + Total part-time working hours in a week
In our example, it will be
120 + 100 = 220 hours.
- Calculate FTE
After determining the
Total working hours in a week, FTE can be easily calculated by dividing
Total working hours in a week by the
Weekly working hours of a full-time employee.
Total working hours in a week = Total working hours in a week / Weekly working hours of a full-time employee
For our example, the FTE will be
220 / 40 = 5.5. This means that our current set up would be the same if we had 5 full-time employees and 1 part-time employee working 20 hours a week.
What is the purpose of FTE?
FTE calculations play an important role in forming business strategies. Knowing it has several benefits when it comes to business planning:
- Calculating FTE helps team managers estimate the amount of hours it will take to finish a project, given in full employee schedules. Budget analysts use this information to calculate the business budget.
- Business owners use FTE to determine how many full-time or part-time employees are required by the company or for a project. This is a crucial step in calculating your employees' productivity.
- Because FTE can be used to answer how long a project will take, it can be used to calculate labor costs, which will help you allocate the correct amount of money for your goal, or see if you can even afford it all together!
FTE Calculation in Paycheck Protection Program Loan Forgiveness
The Paycheck Protection Program (PPP) was launched by the US Small Business Administration (SBA) to help businesses keep their workforce employed during the Coronavirus (COVID-19) crisis. If you want your PPP loan to be completely forgiven, you need to keep the number of FTEs during the 24-week PPP period the same as it was prior to COVID-19. So, how can you calculate the FTE of your company and make sure you're eligible for PPP? Let us show you now.
There are some rules that you should be aware of before we dive into the calculation.
- During the PPP period, 1 FTE is defined as an employee who, on average, worked more than 40 hours a week. It is also worth mentioning that one employee cannot be greater than one FTE, regardless of how much overtime they works.
- Part-time FTE is the sum of the average weekly hours worked by any employees who work less than 40 hours per week divided by 40. For example, if you have 10 employees who consistently worked 15 hours a week, altogether, they would count as 1.5 FTE.
- Total FTE equals the sum of your full-time FTE and your part-time FTE.
Let's look at an example. Say you have a company with 4 employees that work 40 hours per week and 2 employees that work 30 hours a week. You will have 4 full-time FTE and 1.5
(60 total part-time hours / 40) part-time FTE. Hence, your total FTE will be
4 + 1.5 = 3.5 FTE. If you have an FTE of 3.5 before COVID-19 hit, you will be eligible for the PPP loan forgiveness program. Congratulations!
It is then important to note that some FTE calculations do involve a fair amount of assumptions. For example, some governments may simplify the process by assuming each part-time worker to be 0.5 FTE, regardless of the hours they work. Some may even assume any employees who work more than 20 hours a week to be 1 FTE. Therefore, before making a decision using the FTE metric, it is best to check if there are any rules or requirements worth considering.