The term FTE means the full equivalent or amount of work done for 40 hours of employee work during the week. What does the full-time Equivalent literal translation 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. Why is this necessary? Thanks to the FTE calculation, it is possible to compare and find out the labor force efficiency for a given period of time, while taking into account a number of additional factors.
Work efficiency calculation
It is quite simple to calculate the profit that the seller brings to the owner of the company. But how to calculate the income that bookkeeping or lawyers bring? 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 employee of a large company bring.
Calculation method
The basic formula that makes it clear how to calculate FTE is as follows:
Efficiency = ratio of result to spent resources.
When calculating, there are a number of rules that are binding:
- The final result should only be positive. All tasks set earlier must be completed.
- Achieving goals should be adequate. Dates must be comparable with 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 the team in the organization. As an example, take a retail outlet where it is necessary to organize the effective work of employees. To solve this problem, there is a ready-made formula:
The turnover of goods per person = the ratio of turnover for a period of time to the average number.
With this calculation, it is necessary to take into account the time of the year, as well as the most active periods of customer traffic (holidays or temporary promotions). That is why, in order to find out what it is - FTE - when organizing a staff of employees, it is best to take the average rate of income that a person brings over several time periods.
Employee cost
It is important for the owner of the enterprise to know the price that must be paid for the employee’s work. Sometimes employees become a big expense item for the company, but at the same time, employees are also the main capital.
Knowing what FTE is about helps reduce employee costs. The most popular option for saving is to reduce wages. This approach does not always bring the desired result in the end. It is much better to optimize the work of specialists. Spending on employees consists of direct and indirect costs. The first category includes:
- salary;
- social payments;
- staff training;
- layoff expenses.
Indirect expenses include 2 factors: the costs of organizing the workplace of a new employee, as well as providing comfortable working conditions.
If you need to save the enterprise budget, it is worth doing indirect costs. If you correctly present the information to the employees, the savings on stationery or office furniture will be painless, but the reduction in earnings for employees will definitely not be to your liking.