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 students[9] is one of the key metrics for measuring enrollment in colleges and universities. The measure is often annualized to cover the average annual full-time equivalent fte meaning finance students and is designated by the acronym AAFTE. In the landscape of business strategy, the Full-Time Equivalent (FTE) metric plays an essential role, offering critical insights into workforce dynamics. While it’s instrumental in decision-making and growth planning, it’s crucial to remember its limitations and use it with other performance metrics.

When you calculate FTE, you can find the costs of time, personnel, and money to determine staffing decisions. It’s used by businesses to figure out how many full-time or part-time employees are in a company and for organizing projects. It’s an important element to accounting to determine employee wages, hours of service, and your company’s expenses. FTE goes even further than solely calculating project or staffing needs. If you employ 50 or more full-time equivalent employees then you are required to offer health benefits and coverage. FTE is also calculated to see whether or not you qualify for any tax credits.

Keeping FTE ACA-Compliant: What You Need To Know

Subsequently, companies must divide the actual scheduled hours by the number of full-time hours. The part-time employees, on the other hand, work 20 hours per week and 25 weeks out of the year. If your project is estimated to need 250 hours of work to complete, take those 250 hours and divide them by 8 hours, a normal full-time workday. You’re left with 31.3 (rounded to the nearest tenth) which is equal to how many full-time employees you would need to fulfill those 250 hours of project time.

In contrast, a part-time employee working only 20 hours per week would have an FTE of 0.5—which shows that their hours worked are equivalent to half of a full-time employee. By determining your company’s FTE you get a better understanding of how effective and useful your workers are. Part-time workers are usually paid less than full-time employees and may not have access to the same benefits.

Why Measure FTE?

Under this scheme, employees and their families can temporarily continue to avail of their group health insurance coverage even after the loss of a job or other permitted reason as per the law. It is meant to provide an aspect of economic security for employees who https://www.bookstime.com/articles/monthly-bookkeeping-checklist would otherwise be susceptible to losing their insurance. The full-time equivalent is an indicator that answers many of the questions Human Resources departments need answers to. This, therefore allows them to make better decisions regarding personnel management.

From performance to loan and ultimately tax-saving mechanism, it’s important for a company to understand and deploy the FTE calculation while major making decisions. By comparing that figure with industry averages the company can analyze its current productivity. Essentially, FTE provides an understanding of how many full-time workers would be needed to accomplish the same workload as the current combination of full-time and part-time staff. This is useful for budgeting, scheduling, and understanding the overall resource commitment for labor in an organization.