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Full-time Equivalent (FTE)

Definition

Full-time equivalent (FTE) definition

In human resources, full-time equivalent (FTE) refers to the unit of measurement that each business owner uses to indicate the working hours of a call center agent. The employer uses FTE to track the agent’s full-time or part-time involvement in a project or organization.

FTE can standardize wages by demonstrating the equivalent salary of part-time agents based on working full-time. For part-time workers, determining the pro-rata is by changing their working hours with the help of FTE.

Importance of full-time equivalent

Calculating FTE is crucial mainly for accounting purposes in the business. It determines the wages and the calculation of the company expenses needed to pay the employees.

FTE helps the employer develop an understanding of the performance and effectiveness of the part-time employee. It is a useful measurement because it helps budget analysts, project managers, and business owners estimate labor costs.

By determining the complete FTE headcount of full-time employees that a business needs, team leaders, budget analysts, or employers can better forecast the funds they will need to continue the operations of the company or finish a given project.

The FTE count also plays a vital role in determining which positions — whether in a large corporation or a small business — should be full-time and which should only be part-time. The management usually works with human resources on this decision.

One FTE is usually equal to one job vacancy. When it comes to part-timers who are sharing one job, they can be considered equal to one FTE. Meanwhile, some jobs do not require “whole” FTE at all.

Moreover, FTEs play a vital role in monitoring the salaries of part-time employees since they are generally paid less and do not receive the same benefits as full-time workers.

How to calculate the full-time equivalent 

Many BPO companies are using the FTE calculation for various purposes. The calculated data is useful for benchmarking revenues or earnings per employee.

Converting the hourly wages of part-time employees into full-time equivalents may be beneficial in evaluating these metrics.

To calculate the full-time equivalent, determine the employee’s scheduled hours and then divide it by the employer’s hours for a full-time workweek.

 

Full-time equivalent (FTE) definition
Full-time equivalent (FTE) definition

FTE payroll

FTEs are most widely used by companies to determine their employees’ workload and payroll. If the company has part-time employees, this helps determine if their working hours add up to the same number of a full-time staff’s total weekly hours.

For payroll purposes and determining wages, the full-time equivalent assists in calculating salaries. The FTE of a full-time employee is the baseline of a part-time employee’s pay.

For example, if a full-time employee’s salary is US$100,000, a part-timer that works in the same role 20 hours per week with a 0.5 FTE value would make US$50,000 in their payroll. Another part-timer who works for 30 hours per week with a 0.75 FTE would earn US$75,000.

FTE in a nutshell

When a company mainly has part-time employees, business owners can be keen to convert their total hours worked into an FTE basis to compare headcount needed between part-timers and full-time employees.

Project managers can then utilize these converted data for several analytical observations that could help the company’s finances. This includes comparing the total number of employees to profit and revenues that are earned by the business on an annual basis.

Converting staff headcount to FTE also assists the business when it is comparing the company’s total employee number to competitors within the industry.

Outsourcing FAQ

What is Staff Leasing?

What is staff leasing?

Staff leasing is where companies partner with a 3rd-party that will handle the administrative aspects of employment, such that the 3rd-party is the legal entity that employs the staff. This is similar to seat leasing where a company that already has the infrastructure in place, will lease the use of that infrastructure to other companies. In the case of staff leasing, that infrastructure is the HR, payroll, and other employment-related processes; in the case of seat leasing, the infrastructure is the IT and telecommunications equipment only.

Depending on the need of the client, staff leasing companies can either provide the employees using their pre-existing pool of candidates, or the client company can handle the recruitment efforts while the staff leasing company handles the compensation and other sundries. Thanks to the scale of staff leasing outsourcing companies, they are in a position to offer more competitive benefits, such as lower-cost healthcare plans, to which smaller companies would not have access to. In turn, clients not only save on administrative costs, but the cost of an employee turns into a single line-item for easier accounting.

Staff leasing in the Philippines

Staff leasing is arguably the most popular type of business process outsourcing, where both employee and infrastructure is provided by the outsourcing company. Lessening the financial risk to the client should they decide to scale their outsourced team in the Philippines.

Outsource Accelerator's directory lists over 700+ outsourcing companies in the Philippines. All of these are carefully selected for innovation, expertise, and technology that will benefit our clients. We also provide you with guidance on the best staff leasing options you can get in the Philippines for your business.

What is What is business process outsourcing?

What is Business Process Outsourcing BPO?

Business Process Outsourcing (BPO) is the delegation of business processes to an external service provider to a nearby or farther location. BPO uses various technology-enabled services to optimize the delivery of services.

Some of the usual outsourced business functions are the following.

Payroll Accounting Human resources Customer service Sales Marketing

In the case of content providers, these could mean hiring writers, remote editors, or virtual assistants.

BPO speeds up processes and enhances efficiency. Companies that outsource some of their business processes use their time on core services and competencies.

With this shift in focus, companies improve their current processes which may result in improved customer satisfaction. BPO helps companies divert their resources to more critical business strategies.

Often, companies find it impractical to hire a full-time position in-house because of the cost associated with doing so. Outsourcing services can also help them save costs and resources in hiring suitable employees.

How does Business Process Outsourcing work?

Business process outsourcing happens when a business taps a third-party service provider to operate some of its internal processes. Such ‘processes’ include customer service, accounting and finance, or sales.

It is different from hiring an agency to do specific tasks, as the outsourcing provider (BPO) is more concerned with the ongoing production of labour-intensive tasks, instead of the higher-level strategy and guidance.

Now, business process outsourcing has broadened and is more akin to staff augmentation, or staff leasing.

What are the benefits of business process outsourcing?

There are many benefits to outsourcing, as well as some downsides and risks. The common benefits include:

Cost savings

Companies can enjoy savings of up to 70% by leveraging the salaries and costs in countries such as the Philippines and India.

Global market

Businesses get to access a bigger pool of talent that can fit their requirements. They can have better options in hiring employees since they are not limited to what is available in their home countries.

Global presence

At the same time, business process outsourcing opens clients to global trade opportunities. They can establish their global presence and expand more easily to other locations since they already have operations in the area.

Flexible workforce

BPO reduces internal local compliance obligations including providing additional office spaces to employees. Instead, organizations can hold their business operations on a remote setup, most usually having their teams in an office provided by the BPO firm.

Leverage skill

Companies cannot always do everything on their own. BPO enables them to leverage the skills of other specialist companies on more complex tasks such as accounting and IT.

Focus

Lastly, BPO enables organizations to focus on their core business functions. This is since most of their non-core business operations are done with the help of a reliable service provider.

Business process outsourcing examples

The business process outsourcing sector is a vast industry, generating over $200bn annually, and employing millions of people worldwide.

BPO can be seen in different forms and contexts, from hiring single staff to getting an offshore team. Some examples of BPO include:

Big enterprise

Facebook and Uber outsource many of their operational functions, including content moderation for Facebook, and customer service for Uber

Medium-size businesses

A medium business with 50-500 staff might outsource the labour-intensive accounting and finance functions to a team in the Philippines.

Small business and entrepreneur

It is common for small business owners to have a Virtual Assistant (VA) working for them full time and remotely from the Philippines.

What are the different types of BPO?

The type of business process outsourcing can be characterised by their specialisation, location, and size.

Generalist or specialist BPOs

Business process outsourcing is in the human resources and professional services sector. However, their services extend across all industries. The majority of BPOs are generalists, in that they offer a full range of professional services.

Meanwhile, some specialise in certain verticals such as the following.

Legal process outsourcing

Legal process outsourcing deals more with delegating legal processes and compliances to legal firms in another area.

Knowledge process outsourcing

Meanwhile, knowledge process outsourcing enables companies to outsource knowledge-related work including research and development, innovation, and creatives.

Location

Business process outsourcing typically operates from developing nations such as the Philippines, India, and Colombia. They typically have cheaper cost-of-living and bigger populations. Different locations offer different advantages.

Size of BPO

The bigger BPOs employ more than 250,000 people. They are huge, global operations. Medium-sized BPOs range from 500-5,000 staff and offer a full range of services. The smaller BPOs might have 1-500 people.

Functions of business process outsourcing

Collectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include:

Finance and accounting

Outsourced finance and accounting services help businesses manage their books, monitor cash flow, and keep up with corporate income tax compliances without fuss.

Healthcare

Healthcare outsourcing, meanwhile, organizes various back- and front-end functions done for the healthcare and insurance industries.

Creative and content

Creative services outsourcing covers everything from post-production of Hollywood movies to newspaper and website content.

Tech, IT and development

IT outsourcing involves delegating network management, web and app development, and cybersecurity protection to IT firms in different countries.

Sales & customer support

Some BPO providers specialize in sales and customer support for pre- and post-sales transactions. This helps companies meet the expectations and demands of their customers, keeping them satisfied even after their purchase.

Marketing

BPOs and marketing firms can help in ongoing marketing, communication and branding activities for their clients. This helps them attract more suitable leads in a cost-efficient way.

Talent and HR

Businesses can delegate HR, recruitment and compliance to professional employer organizations to maximize recruitment and workforce management.

Administration

Generalist BPOs help organizations accomplish general business administration and operational activities. This includes data entry, appointment setting, and other related functions.

Supply chain management

Lastly, e-commerce stores benefit from outsourcing supply chain management to manage warehouse and delivery processes.

Top BPO companies in the world’s top outsourcing hubs

A wide range of business process outsourcing companies in different parts of the world provide utmost services to their Western and local clients. Many of them even earned recognition by award-giving bodies due to their performance in both their roles and their level of care for the employees.

Check out the top BPO companies in several outsourcing destinations below.

Top BPO companies in the Philippines Top Indian BPO companies Top South African BPO companies Business Process Outsourcing (BPO) services

With the rise of new offshore outsourcing locations, companies can have better options in terms of location and services they can delegate. However, finding a suitable BPO company can be a daunting task to be done on their own.

Good thing advisory services such as Outsource Accelerator is there to help them.

Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2,500+ BPOs from different locations.

Outsource Accelerator's offerings make it easier for clients to learn about, and engage with, business process outsourcing companies worldwide.

Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!

Full-time employee definition

Full-time employee definition

A full-time employee (FTE) is used to describe someone who is exclusively employed by a company. This employee may work for forty hours a week or more, which could be equivalent to day-time business hours. 

A full-time employee (FTE) is also privileged with statutory benefits that are provided by the employer.

The Philippines is one of the countries where the BPO industry flourished greatly. It has since opened many job opportunities for the people, employing about 1 million alone within the outsourcing industry. 

In the outsourcing industry, a full-time employee can have varying working shifts to accommodate the clients’ timezone.

Importance of designating FTE status

Distinguishing employees between “full-time” and “part-time” is important because part-time staffers typically do not receive the following:

Paid time off for holidays or vacations Employee benefits  Employer retirement plans.

Designating full-time and part-time status to your staff can also affect whether your workers are considered as salaried or hourly, and exempt from taxes or not. This can also determine how you pay your workers for their overtime shifts. 

This is why it’s crucial to understand the difference——and how many hours part-time and full-time employees typically work—before hiring employees at your small business. 

However, as a business owner, you have to be careful not to discriminate by making some workers in similar jobs part-time while others in the same job are full-time. 

Denying benefits to part-time employees who work in the same range and hours as your full-time staff can have consequences depending on your local laws.

Outsourcing full-time

Outsource Accelerator provides you access to great full-time dedicated remote staff that you can outsource from the Philippines starting from $6 per hour, where you can save up to 70% on staffing costs. 

We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2500 BPOs… all designed to make it easier for clients to learn about, and engage with outsourcing.

What is Payroll?

What is payroll?

Payroll can refer to three things: 1) the calculation and distribution of paychecks; 2) the record of wages, taxes, contributions, and withholdings of employees; and 3) the total amount paid to employees by the company.

Payroll is important in different ways. For employees, the payroll is important for living expenses, and a timely or late paycheck can spell the difference between good and bad morale.

For businesses, payroll is important to see the actual net profit for the fiscal period. For business owners, a properly done payroll is important for compliance with the law. For this reason, many businesses entrust their payroll to dedicated professionals who can process them with speed and accuracy.

Outsourcing payroll services

One of the more popular outsourced functions is the payroll process. Because of the importance of having an efficient payroll, companies that can afford to do so tend to outsource it to dedicated professionals.

Outsourcing companies in the Philippines are experienced with the Generally Accepted Accounting Principles (GAAP) that are being followed in the country they are servicing.

Outsource Accelerator connects you with payroll firms that have extensive experience with the regulatory framework in the US and have a proven track record in accuracy and timeliness in payroll delivery. We make it easier for clients to learn about, and engage with payroll outsourcing.

How payroll is processed

The payroll process nowadays usually involves utilizing payroll software for more efficient and accurate handling. Yet, most small business owners still handle their payroll functions manually, especially when they are starting.

Before the payroll processing begins, employers should prepare the requirements given by their employees such as their tax and financial information. They would also need to secure their employer identification number (EIN) to ensure that deductions such as payroll taxes and employee benefits are accounted for.

The following are the steps for payroll processing.

Choose an effective payroll schedule

First, choose a payroll schedule that can work best for a business. Some of the most popular pay schedules include the following.

Weekly. Businesses can pay their workers on a specific day of the week, regardless of the date. For instance, payroll can be given every Thursday or Friday. Bi-weekly. In another variation of the weekly pay, businesses can provide payroll on a specific day every two weeks. Semi-monthly. Semi-monthly pay is the most common payroll schedule used in most countries. Employers pay their workers twice a month on two specific dates. Monthly. Lastly, employers can provide employee wages every month on a specific date.

Pay schedules are usually affected by an organization's practice and the legal compliances for pay frequencies in a certain location.

Calculate employee's gross pay

Depending on an organization's practice, an employee's gross pay can either be fixed or based on their daily or hourly wages.

For the daily and hourly workers, employers should calculate the total number of hours or days an employee has worked in a pay period. A time tracking software can best benefit them for this.

Firms should at the same time consider overtime hours, late logins, leaves, and absences when calculating. Overtime calculations and other additional charges may depend on the country their employees are in.

Identify deductions

Gather knowledge of the different deductions that employees are subject to. In the United States, the different deductions applicable for employees include the following.

Federal taxes/tax withholdings State taxes Social Security 401(k) contributions Workers compensation

Different states and countries collect different taxes and deductions. With this, employers should be mindful of the policies of each country where their workers sit. This would be easier with a reliable payroll provider on their side.

Calculate net pay and process payments

Subtract gross pay to the applicable deductions for each employee. The amount left after deductions will be the employees' take-home salary for the specific pay period.

The most common ways to pay employees include direct deposit, prepaid cards loaded with salaries, and paychecks to be distributed to each worker.

Make necessary connections and keep records

Be sure to keep records for salaries in different pay periods through copies of payslips and payroll records. Make any changes and corrections to employee salaries in case of discrepancies and inaccuracies in their pay.

Remit deductions

Lastly, companies should make sure to remit the deductions from each employee as a part of their compliance. It's best to consult an accountant for the appropriate tax deductions and always report new hires to the Internal Revenue Service.

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About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

The #1 outsourcing authority

Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 3,000+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.