What is full-time equivalent (FTE)?
In a literal translation, Full time equivalent calculation means ” equivalent full – time .” Thus, we can say that the FTE is an indicator that allows managers to clearly visualize the monthly productivity time of each employee.
In the corporate day to day, it is very unlikely that a professional spends all of his/her workload producing. That’s because there are breaks to go to the bathroom, have coffee, chat with colleagues or even check social media. This type of break is part of any business and even impacts the organizational climate .
Thus, to reach a percentage of FTE, it is necessary to consider the number of working hours that, on average, professionals dedicate to their activities during the month, not counting vacations, leaves and justified absences.
Based on the indicator, HR is able to compare the team’s productivity levels , predict the need for seasonal hires, assess aspects of the company’s infrastructure and make a more assertive decision about staff cuts .
How important is FTE?
The main role of the FTE is to serve as a parameter for decision-making by managers in relation to promotions, layoffs, division of tasks , training and talent development.
Through this indicator, HR is able to identify internal needs and capabilities , in addition to exercising a more strategic management.
A practical example of the importance of the indicator is in relation to productivity. Imagine that, with the same FTE, an employee delivers 100 units, while another only delivers 30. In this case, the calculation can show that the first professional is highly qualified for the position he holds, while the second needs more training and development.
In addition, other advantages of evaluating the indicator are:
- measure the impacts of unexcused absences;
- assess whether the workload is compatible with the employee’s journey and make the necessary adjustments;
- minimize idle working hours;
- assess the need for new hires or cuts;
- identify collaborators on demand;
- compare results with those of other companies;
- reduce costs with excess people.
Thus, the metric allows more clarity about the workforce and the possibilities of the team. Identifying each professional’s time and training and development application needs to optimize processes and improve overall performance.
How to calculate FTE?
After all, how is it possible to calculate the full-time equivalent to be able to enjoy the benefits of the indicator? The calculation is simpler than it seems, for that, it is necessary to consider the employee’s working hours and the full-time working day limit.
The first step is to identify employees who work full-time, that is, 40 hours a week. For the calculation to be performed correctly, also include vacations, holidays and excused absences.
Now, consider, for example, three distinct situations:
- João works 30 hours a week;
- Antônio reaches 40 hours;
- Maria works 48 hours a week.
Based on these data, to calculate the FTE percentage, it is necessary to divide the number of hours worked by the average value of the full period , that is, by 40. Thus, we would have the following results:
- John: 30 ÷ 40 = 0.75 or 75% FTE;
- Antonio: 40 ÷ 40 = 1 or 100% FTE;
- Mary: 48 ÷ 40 = 1.2 or 120% FTE.
The same should be done with part-time employees. Thus, it is necessary to divide the amount of hours worked by the hours contracted to arrive at a percentage.
When HR uses FTE to determine the hours needed for a task, it’s also important to look at the time spent on breaks and breaks , such as interactions and coffee minutes.
In our example, let’s simulate that managers noticed that this type of break consumes about 15% of the workday . Thus, an employee who had 100% FTE now has 85% with the margin. Therefore, if the estimate is that, with 100%, 10 tasks would be delivered, it is understood that this employee will only be able to deliver 8.5 on average.
FTE is a very comprehensive indicator and HR can use the metric to calculate both the productivity time of each employee and teams as a whole. For this, it is necessary to separate the employees who work full-time from those who work part-time, find the hours worked by each group and combine them.
Finally, based on this number, it is also possible to measure the annual, monthly or daily FTE. So, just divide the total hours worked by the number of full hours in the desired period.
What are the applications of the full-time equivalent?
FTE can be used to analyze the organization’s operations and measure the team’s productivity. Thus, HR is able to think of new strategies to improve engagement and achieve results. Besides, the indicator is also a good tool for other applications. Below, we explain each of them further.
1-Calculating the cost of a new employee
One of the best-known applications of FTE is the cost projection of new hires . By better understanding the professional’s workday and how many hours are needed to perform each activity, it is possible to adjust the salaries of future hires and promote a cut in expenses.
For this calculation, the costs of the recruitment and selection process , the amounts spent on benefits, taxes and expenses with the acquisition of equipment must be considered.
2-Definition of hiring and working hours regimes
By applying the FTE and analyzing the metrics, it is also possible to understand which hiring regimes will bring the most results and the least financial impacts .
Some countries in Europe, for example, analyzed that a journey of 6 hours a day yielded the same productivity as a full-time one, with the benefit of bringing more quality of life and production to the employee. In this context, to reach this type of conclusion, it is essential that the manager apply the FTE.
3-Verification of outsourced work feasibility
Since the changes in labor laws in 2017, much has been said about outsourcing and the real value that this type of service brings to the company.
In this scenario, the FTE helps the organization to compare performances and understand, in a precise way, whether an outsourced worker really is more advantageous than one hired under the CLT regime. For this, it is worth counting on the help of other companies in the field that can provide data for analysis.
Unattainable or unrealistic goals often end up discouraging employees and even negatively impacting their productivity.
Thus, the FTE can be a good tool to understand the time each demand can take and set challenging goals , but which can be accomplished within the professional’s workday.
5-Creating training and development programs
Finally, by comparing the FTE of each professional, the Human Resources department is also able to better target its people management, identifying employees who are showing lower productivity and creating development strategies to match the teams.
Thus, this metric can be a good tool to identify less motivated teams and find gaps in roles that require better technical skills.
How to improve the full-time equivalent number?
Each company has a certain workload for its monthly tasks to be carried out. Thus, the common objective is to carry out an efficient work and obtain results using the least amount of labor possible, reducing costs.
By reducing the need for hours worked, it is possible, consequently, to reduce costs spent on hours paid, lay off excess employees and improve FTE. Here, the ideal alternative is to opt for technologies and tools that make it possible to automate operational tasks .
By optimizing repetitive processes that consume employees’ time, you allow these professionals to act more strategically and achieve better productivity within the workday .