How FTE (Full-Time Equivalent) Helps Businesses

In bookkeeping, FTE (Full-Time Equivalent) represents the total number of full-time hours worked by an organization, regardless of whether employees are full-time, part-time, or temporary. It's a way to measure workforce capacity for budgeting, resource allocation, and productivity measurement.

FTEs are most widely used by companies to determine their employees’ workload, with the perspective of trying to determine how many part-time employees and the hours they work add up to the same number of hours worked by full-time employees. It is critical for accounting purposes and determining wages, and for calculating the company’s expenses when paying its workers.

FTE Helps Businesses

• Standardize Workload Measurement: It allows for a consistent way to compare and measure the workload of different employees, regardless of whether they are full-time, part-time, or contract workers.

• Manage Workforce: It helps in planning, budgeting, and resource allocation by providing a clear picture of the total workload capacity of the organization.

• Analyze productivity: FTE can be used to analyze the productivity of different teams or departments, and to identify potential areas for improvement.

Calculating FTEs

The breakdown for an average, full-time worker and their hours on an annual basis is calculated by assuming the worker follows an 8-hour workday and works five days out of the week:

8 hours per day  x  5 days per week  =  40 hours

The figure is then multiplied by the number of weeks worked every year:

40 hours per week  x  52 weeks per year  =  2,080 hours

This is how a company, on average, calculates the average yearly number of hours that a full-time employee works.

An Example of Full-Time Equivalent at Work

Let's say your company considers a full-time workweek to be 40 hours. In your team, you have Jennifer who works 40 hours per week, and you have 3 part-time employees: Daniel, who works 5 hours per week, Nicole, who works 15, and Bobby, who works 20.

Now, Jennifer is a full-time employee, so her FTE is 1.0. Daniel, Nicole and Bobby do not work a full 40 hours a week, and to calculate the Full-Time Equivalent of the hours they work, you must divide each employee’s working hours by the company’s hours for a full-time workweek.

The Importance of Determining FTEs

For a business, specifically those with a large number of part-time workers, converting worked hours into FTEs is important in helping the company know how many full-time employees the part-time workers are equal to.

In the end, is important for a company to determine FTEs because it allows it to gain a better understanding of the effectiveness and usefulness of its part-time workers, based on the amount of work done and perhaps, most importantly, because part-time workers are generally paid less and don’t receive the same benefits that must be offered to full-time employees. All the above-mentioned factors end up costing the company something and affecting its bottom line.

Reach Out for Help

Everyone deserves a supportive team of people who care. Cloud Bookkeeping Inc.’s team provides monthly bookkeeping and accurate financial reports. We’ll give you financial visibility throughout the year and deliver insights to make strategic business decisions

Get in Touch with Us for Our Services

We don’t just say it, we deliver – our work speaks for us! Contact us for 30 minutes of free consultation and opt for our Online Bookkeeping Service. 

Cloud Bookkeeping, Inc. 

(Our Office Addresses)

1. 3281 E. Guasti Road, Suite 700

Ontario California 9176

2. 5000 Birch St., West Tower,

Suite 3000 Newport Beach, CA 92660

Tel: +1 (909) 952-3804

Website: www.cloudbookkeepinginc.com