Full-time equivalent is one of the most used metrics by companies that want to determine the workload of their employees, with the perspective of trying to determine how much part-time employees work and if the hours they work add up to the same number of hours. hours worked by full-time employees.
It is essential for accounting purposes and to determine salaries, as well as to calculate the company’s expenses when paying its workers.
How to calculate full time equivalent?
Full-time equivalent is a calculated metric that sums all actual full-time employees with the fractional values of all part-time employees, contractors, students, and interns.
How to calculate full-time equivalents. Count full-time employees + Sum (fractional contribution for all non-full-time employees)
Example:
If you have 10 full-time employees, an accountant who works 2 days a week, and a student who currently only works 3 days a week, the calculation would be 10 full-time employees + 2/5 for the accountant + 3/ 5 for the student = 11
In this way, this figure reflects the company’s work capacity, regardless of the actual number of employees and variations in hours worked during a given period.
Advantages of measuring the equivalent in time
From a financial standpoint, knowing your full-time equivalent number makes it easier to calculate a number of performance metrics, such as revenue.
Knowing what the full-time equivalent is is also important from a legal and government reporting perspective, and for knowing the obligations that govern smaller and larger companies.
Ultimately, it is important for a company to determine the full-time equivalent because it allows it to better understand the effectiveness and usefulness of its part-time workers, based on the amount of work performed and, perhaps, most importantly, because the workers Part-timers typically earn less and do not receive the same benefits that should be offered to full-time employees.
Remember that all of the factors mentioned end up costing the company something and affecting its results.