FTE - what is it? Examples and calculation methods

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The term FTE means the full equivalent or amount of work done for 40 hours of work of employees during the week. What does the literal translation of Full-Time Equivalent sound like? This is the equivalent of full employment. What is it - FTE - you need to know the managers of large companies who need to optimize the work of their employees. What is it for? Thanks to the FTE calculation, it is possible to compare and find out the efficiency of the workforce over a given period of time, while taking into account a number of some additional factors.

Calculation of work efficiency

It's quite easy to calculate the profit that the seller brings to the owner of the company. But how to calculate the income that brings accounting or lawyers? To get acquainted with the term FTE, to find out what it is, is necessary first of all in order to understand how much income the efforts of each individual employee of a large company bring.

Calculation method

The basic formula that makes it clear how to calculate FTE is as follows:

Efficiency=the ratio of the result to the resources expended.

When calculating, there are a number of rules that must be followed:

• The final result must be only positive. All tasks set earlier must be completed.
• Achieving goals must be adequate. Deadlines must be comparable to the tasks set, employees must be provided with all the necessary resources.

Staff organization

To understand in more detail what it is - FTE, you should know that he is responsible for the formation of a team in an organization. As an example, let's take a retail outlet where it is necessary to organize the effective work of employees. To solve such a problem, there is a ready-made formula:

Turnover of goods per person=the ratio of turnover over a period of time to the average number.

In this calculation, it is necessary to take into account the time of the year, as well as the most active periods of customer attendance (holidays or temporary promotions). That is why, in order to find out what it is - FTE - when organizing a staff, it is best to take the average income that a person brings in several time periods.

Employee cost

It is important for the owner of an enterprise to know the price that must be paid for the work of an employee. Sometimes employees become a big expense of the company, but at the same time, employees are the main capital.

Knowing what FTE is and what it is helps reduce employee costs. The most popular way to save money is to reduce wages. This approach does not always bring the desiredresult in the end. It is much better to optimize the work of specialists. Employee spending consists of direct and indirect costs. The first category includes:

• salary;
• social benefits;
• employee training;
• expenses related to layoffs.

Indirect costs include 2 factors: the cost of organizing the workplace of a new employee, as well as providing comfortable working conditions.

If it is necessary to save the budget of the enterprise, it is worth dealing with indirect costs. If you present information to employees correctly, saving on stationery or office furniture will be painless, but cutting wages will definitely not be to your taste.