In this blog, we explain what FTE (Full-Time Equivalent) is and why it's important for your organization. We'll show you how to calculate FTE, taking into account flexible working hours and working from home.
Where does FTE mean?
FTE, or Full-Time Equivalent, is a way of calculating employees' working hours. It shows how many full-time employees there would be if you added up all the hours of part-time employees. What is 1 FTE? One FTE equals a full working week, usually between 36 and 40 hours, depending on the organization.
Why is FTE important?
FTE is important because it helps companies better understand their staff deployment. By using FTE, companies can more easily plan how many employees they need, distribute the workload fairly and manage costs better. It also makes it easier to measure productivity, regardless of whether someone works full-time or part-time. In short, FTE gives companies a clear picture of their staffing needs and helps them make smart decisions.
How do you calculate an FTE?
Calculating FTE (Full-Time Equivalent) helps you get a clear overview of your staff deployment. To better understand working hours and how to manage them effectively, we'll explain the following:
- The basic formula of FTE calculations
- Examples of calculations
- How different contract types affect FTE
- Common mistakes and how to avoid them
Basic formula for FTE calculation
Calculating an FTE is fairly simple. You add up the number of hours worked by all employees and divide this by the number of hours that a full-time employee normally works. The basic formula is:
Total hours worked/Total number of working hours
For example, if a full-time work week is 40 hours and an employee works 20 hours per week, that employee is 0.5 FTE (20 hours/40 hours = 0.5 FTE).
Examples of FTE calculations
Simple example
- Let's say you have two employees. The first employee works 40 hours a week and the second 20 hours a week.
- Both work in an organization where a full-time working week is 40 hours.
- First employee's FTE = 40 hours/40 hours = 1.0 FTE
- FTE of the second employee = 20 hours/40 hours = 0.5 FTE
- Total FTE = 1.0 + 0.5 = 1.5 FTE
More complex example
- Let's say you have three employees. The first works 35 hours a week, the second 30 hours, and the third 25 hours.
- In a full-time working week of 40 hours, the calculation is as follows:
- First employee's FTE = 35 hours/40 hours = 0.875 FTE
- FTE of the second employee = 30 hours/40 hours = 0.75 FTE
- FTE of the third employee = 25 hours/40 hours = 0.625 FTE
- Total FTE = 0.875 + 0.75 + 0.625 = 2.25 FTE
FTE for various contract types
When calculating FTE, it is important to consider the type of contract your employees have. Whether you work with full-time, part-time, or flexible workers, each type influences the FTE calculation. We'll be happy to explain how to determine FTE for different contract types and give you tips on how to prevent errors.
Full-time vs. part-time
When calculating FTE, it is important to know whether you are dealing with full-time or part-time employees. Full-time employees are often counted as 1.0 FTE, while part-time employees represent a fraction of an FTE. For example, if a full-time work week is 40 hours and someone works 20 hours, that person counts as 0.5 FTE.
Flexible hours and FTE
For employees with flexible hours, the FTE calculation can be slightly more complex. You must collect the total hours worked over a period of time (for example, a month or a year) and divide it by the standard working hours for that period. This can help you get a more accurate picture of their contribution, even if their working hours vary.
Pitfalls in FTE calculations
Below are some of the most common pitfalls in FTE calculations.
Common mistakes
- Use incorrect working hours: It is important to use the correct hours per week when calculating FTE. Errors can occur if you don't maintain your organization's standard working hours.
- Do not take into account unpaid hours: Sometimes unpaid hours or overtime are not included. Make sure you only include paid hours in your calculation.
- Wrong calculation for flexible hours: Keeping flexible hours can be difficult. Make sure you have a good method to correctly register these hours and convert them to FTE.
Tips for staying accurate
- Use a standard work week: Determine a standard number of hours per working week for your organization and stick to this number when calculating FTE.
- Regular monitoring: Regularly check that your time registration is correct and that your FTE calculations are consistent. This prevents errors and ensures an accurate representation of your staff deployment.
- Automate where possible: Consider using software or tools that make FTE calculations automatically. This can reduce errors and save time.
Complex FTE calculations
If you go beyond the basic calculations, you sometimes end up in more complex situations. Here, we'll discuss how to calculate FTE in special cases, such as seasonal or project-based work, and how overtime and leave can influence your calculations.
More complex scenarios
- Seasonal work: In sectors where work mainly takes place during certain seasons, such as agriculture or retail, employees often only work during busy periods. To calculate the FTE for seasonal work, add up all hours worked during the season and divide by the number of hours in a full year. This gives you an average FTE for that season.
- Project-based work: When working on a project basis, employees may have irregular hours, depending on the progress of the project. Add up the hours worked during the project and divide them by the number of hours in a standard working week or month to calculate the FTE for that project.
FTE in relation to overtime and leave
Overtime and leave may affect your FTE calculations. Overtime increases the number of hours worked, which can increase your FTE. Leave, such as vacations or sick leave, reduces hours worked and can lower the FTE. Keep this in mind when calculating the FTE to get a realistic picture of work capacity.
FTE calculator tool
An FTE calculator is a handy online tool that helps you quickly calculate your FTE. You enter your employees' hours worked and the standard working week, and the FTE calculator does the rest. This saves time and makes math a lot easier.
How to use the FTE calculator
With our online FTE calculator, you can easily calculate your FTEs for full-time employees and part-time employees.
1. Enter the number of employees who work full-time.
2. Enter the number of working hours of the full-time employees.
3. In addition to full-time employees, do you also have part-time employees?
Then enter the number of employees who work full-time.
4. Enter the number of working hours of the part-time employees.
FTE in Workforce Planning
The use of FTE plays an important role in staff planning and helps companies to optimally organize their staffing. By understanding and applying FTE properly, you can deploy your staff more effectively and budget better.
How to Use FTE for Staffing
FTE provides a clear overview of how many employees you have in terms of full-time working hours. This helps plan staffing by ensuring that you have enough employees to meet demand without deploying too many staff. By knowing how much FTE you need, you can efficiently create schedules and schedule employees at the right times.
Budgeting and Cost Analysis with FTE
FTE also helps with budgeting and analyzing staff costs. By calculating the FTE, you can easily see how much you spend on salary and other personnel costs. This makes it possible to plan and manage your budget more accurately, and to identify cost savings by looking at the ratio between hours worked and costs.
FTE and productivity
There is a strong relationship between your staff's FTE and your company's efficiency. By optimizing FTE, you can better distribute the workload and ensure that employees can do their work more efficiently. Too many staff can lead to inefficiency and higher costs, while too few can result in overload and lower productivity. The right balance helps to improve business efficiency.
Examples of successful FTE strategy
- Retail company: A retail company noticed that their staff was not optimally organized, leading to long waiting times and dissatisfied customers. By performing a detailed FTE analysis and adjusting the schedules based on busy periods, they were able to make better use of their staff. This resulted in faster customer service and an increase in customer satisfaction.
- Technology company: A tech company had to deal with fluctuations in demand for their products. They implemented a flexible staffing system where they performed seasonal FTE calculations and hired temporary staff during peak periods. This helped them reduce costs and increase productivity without sacrificing the quality of their services.
With the right FTE strategies, you can not only optimize your staffing, but also improve your company's productivity and efficiency.
The rules of FTE
When managing FTEs, you must take into account legal rules that affect employment conditions, social security and taxes. Here we explain how FTE relates to employment law and what the implications are for social security and taxes.
FTE in employment law
FTE plays an important role in employment law and influences various aspects of employment conditions:
- Employment contracts: The FTE calculation often determines the amount of work and associated rights. For example, a part-time employee receives vacation days and other benefits in proportion to their FTE. Make sure that employment contracts clearly state how the FTE is calculated and what this means for employment conditions.
- Overtime and compensation: Overtime regulations may vary based on an employee's FTE status. For example, how overtime is calculated and reimbursed depends on how many hours an employee works according to their FTE. This must be in line with the legislation to avoid legal problems.
Social security and tax consequences
The FTE calculations also affect social security and tax liabilities:
- Social security: The number of FTE employees can influence the amount of social security contributions. This may relate to pension and health insurance. Make sure you follow the social security contribution rules based on your FTE structure.
- Taxes: A company's tax liabilities may vary depending on the number of FTE. This affects how you file tax returns and what tax benefits you can claim. Stay up to date with tax laws that apply to your staffing to avoid tax risks.
It is essential to follow all relevant legal requirements when calculating FTE to prevent legal problems and tax penalties, and to ensure fair treatment for all employees.
Future of FTE in a labor market
The labor market is changing rapidly due to flexible work, working from home and technological innovations. These trends influence how we calculate and manage FTE. Here, we discuss the impact of these changes and the role of technology in FTE tracking and analysis.
Impact of flexible work and working from home on FTE
- Flexwork: The rise of flexible working hours and temporary contracts makes calculating FTE more complex. Flex workers often have irregular hours, which makes it difficult to calculate the FTE accurately. Companies must use flexible systems to effectively record and integrate these hours.
- Working from home: Working from home leads to variable working hours and makes monitoring difficult. Organizations must implement reliable tools and strategies to closely monitor remote workers and calculate their contribution correctly.
Developments in FTE tracking and analysis
- Automation: New software simplifies the collection and analysis of FTE data. Automation reduces errors and increases efficiency by automatically tracking hours worked and FTE.
- Data analysis: Advanced analytics tools provide deeper insights into staffing and productivity. By analyzing work hours and performance, companies can recognize trends and improve their FTE management.
- Integration with other systems: Modern FTE tools can be integrated with payroll and project management systems. This integration ensures accurate FTE calculations.
With labor market changes and technological advancements, companies need to be flexible and technologically advanced to optimize their FTE management.
Conclusion: FTE as a strategic tool
FTE is an essential tool for effective personnel management and offers strategic benefits to your organization. Here are the key points and an action plan for successful FTE management.
Summary of key points
- Definition: FTE converts work performance into full-time equivalents, helping with staff planning and management.
- Calculations: Basic calculations are simple, but flexible work and project work require adapted approaches.
- Legal rules: Take employment law, social security and tax rules into account when calculating FTE.
- Future: Flexwork, working from home and technology are changing how we manage and analyse FTE.
Action Plan for Effective FTE Management
- Understand and calculate your FTE structure.
- Implement flexible systems for variable working hours and working from home.
- Use technology for automated FTE calculations and analyses.
- Ensure compliance with rules.
- Review and update your FTE management regularly.
By strategically managing FTE, you improve the efficiency and effectiveness of your personnel management.
