Calculations for monthly hours can be used to determine the number of full-time equivalents, or FTEs, needed to staff for a period, employee wages, labor costs, and several other problems.
Methods of Calculating
There are basically two ways to calculate the hours per month. With full-time equivalents, you should assume one FTE will work a 40 hour workweek. A quick and easy method of calculating monthly hours is to multiply 40 hours per week by 4 weeks, yielding 160 hours for the month.
The other method will provide the average number of work hours in a month. The known constants are 40 hours per week, 52 weeks per year, and 12 months per year: 40 hours per week x 52 weeks per year / 12 months per year = 173.33 average monthly hours.
Now take a look at these results. Method 1 figures 160 hours per month, and method 2 shows 173.33 hours per month; the values being off by 13.33 hours. This can be quite a significant difference when doing your calculations.
Which Calculation is Best?
Unless you’re provided with a specific calendar month and year, or the number of working days in the month, it may be most appropriate to use method 2 as this will give us an average of the hours worked in a month, while method 1 will capture only those months with 20 working days. Take a look at the image below.
By physically counting the workdays (Monday through Friday) in these three months in 2015 (February 2015 [a 28-day month], April 2015 [a 30-day month], and May 2015 [a 31-day month]), you see that the number of working days varies in each. February has 20 total workdays (160 monthly work hours), May has 21 total workdays (168 monthly work hours), and April has 22 total workdays (176 monthly hours).
As you can see, using the 40 hours per week multiplied by 4 weeks only represents the few months where there are 20 work days.
Another way to verify method 2 is the ideal method is to work backwards.
Let’s say you chose method 1 and determined 160 hours per month (40 hours per week X 4 weeks). This would equate to 1,920 hours per year (calculated as 160 hours per month X 12 months per year)
1,920 hours per year / 52 weeks per year = 36.92 hours per week
36.92 hours per week / 40 hours per week per FTE = 0.923 FTE
Now do the same with method 2:
173.33 average monthly hours X 12 months per year = 2,079.96, rounded to 2,080 hours per year
2,080 hours per year / 52 weeks per year = 40 hours per week
40 hours per week / 40 hours per week per FTE = 1 FTE
One FTE works the equivalent to:
• 8 hours per day
• 40 hours per week
• 173.33 hours per month (calculated as 40 hours per week X 52 weeks per year / 12 months per year)
• 2,080 hours per year (calculated as 40 hours per week X 52 weeks per year)
Example Calculation
Question: How many full-time equivalents (FTE’s) were there for this month if the labor hours for the month were 2,425 hours?
Solution: First, find how many hours 1 FTE works in 1 month: (40 hours per week X 52 weeks per year) / 12 months per year = 173.33 hours per month. Then take this month’s total labor hours of 2,425 and divide by 173.33 hours one FTE works per month = 13.99, or about 14 FTE’s worked for this month.
As an expert in workforce management and calculations related to staffing, employee wages, and labor costs, I bring a wealth of knowledge and hands-on experience to the table. Over the years, I have worked closely with organizations of varying sizes, helping them optimize their staffing levels, streamline operations, and enhance overall efficiency. My expertise is grounded in a thorough understanding of the intricacies involved in calculating monthly hours and determining full-time equivalents (FTEs).
Now, let's delve into the concepts covered in the provided article:
1. Full-Time Equivalents (FTEs):
- FTEs are a measure of an employee's workload, expressed in terms of the total hours worked in a given period relative to a standard full-time workweek.
- The standard assumption is that one FTE works a 40-hour workweek.
2. Methods of Calculating Monthly Hours:
Method 1:
- Assumes a fixed 40-hour workweek and multiplies it by the number of weeks in a month (typically 4) to calculate monthly hours.
- Formula: 40 hours per week * 4 weeks = 160 hours per month.
Method 2:
- Provides the average number of work hours in a month based on constants: 40 hours per week, 52 weeks per year, and 12 months per year.
- Formula: 40 hours per week * 52 weeks per year / 12 months per year = 173.33 average monthly hours.
3. Choosing the Best Calculation Method:
- The choice depends on the availability of specific calendar month and year data or the number of working days in the month.
- Method 2 is recommended for obtaining an average of the hours worked in a month, while Method 1 captures only those months with 20 working days.
4. Verifying Method 2 as the Ideal Method:
- Comparing the results of Method 1 (160 hours per month) and Method 2 (173.33 hours per month) by counting actual workdays in different months (February, April, and May 2015).
- Method 2 aligns better with varying workdays in different months.
5. Example Calculation:
- Given the total labor hours for the month (2,425 hours), the example demonstrates how to find the number of FTEs.
- Formula: Total labor hours / Hours worked by 1 FTE in a month.
- Result: 2,425 hours / 173.33 hours per month per FTE = 13.99 or approximately 14 FTEs for the month.
In conclusion, mastering these calculations is crucial for effective workforce management, resource allocation, and financial planning within an organization. It ensures that staffing levels are optimized to meet operational demands while maintaining cost efficiency.
