Using Monthly Hours For Calculations
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 employees, you should assume one employee 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.
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.