FTE for an employee is used to calculate the number of hours that she/he had worked in a week. It is calculated as:
Employee’s scheduled hours are divided by the Employer’s hours for a full-time workweek.
The primary 9 to 5 job (with 1 hour of lunch break) has a scheduled workweek of 40 hours. So, an employee who accomplished the complete shift of 40 hrs has an FTE as 1.0. Similarly, if an employee covered 20 hrs, her/his FTE will be calculated as 0.5 and so on.
Calculation of FTE is very important for an organization in terms of determining the cost and billables for a project. Converting hours worked by part-time employees into full-time equivalents can be helpful when calculating these metrics. It is also crucial for decisions pertaining to resource management, especially for staffing- in terms of measuring project duration, resource compensation packages, among other functional aspects. A company may also use the FTE data to benchmark revenues or profits per employee.
This metric can be very useful for companies which usually charter the services of contractors on a large scale and endure projects for months. In the same way, part-time employees can benefit from FTE since they tend to sometimes lose benefits as compared to full-time employees.
Many Softwares allows for achieving this objective, such as xTimesheet. It has a well-built timesheet approval system and invoice module, which can handle this very well. The user only needs to click generate a monthly invoice after selecting the required project and duration of the billing period. Its advanced time tracking feature dispenses the option to make more reliable budget estimates.
Summing up, FTEs give the success of accurate forecasting. It will help you plan your project work in regards to deadlines and your budget. Once you decide the specific purpose of FTE, follow through with it.