Revenue per full-time equivalent (FTE) is a key business metric used to measure how much revenue your people generate for your business, providing insight into how effective a business’s workforce is in terms of productivity and performance. This high-level metric allows you to quickly measure the overall productivity of your employees.
To calculate it you only need two figures, which are annual revenue and the total number of fulltime equivalent employees for your business.
The calculation:
Annual Revenue / Total FTE = Revenue per FTE
For example, a company with $1.2 mill in turnover and 10 FTE would be:
$1.2mill / 10 = $120,000 revenue per FTE.
What is an FTE?
FTE means the number of employees on your business when ratioed against the hours performed by a fulltime employee.
For Australia, the typical number of hours for t a fulltime employee is 38.
So 1 FTE is 38 hours of work.
To calculate your FTE, simply add up the number of fulltime employees. Then calculate the FTE for those employees who are part-time and casual using the number of hours that they work.
For example, an employee who works 15 hours a week is approximately 0.4 of an FTE (15/38×100 = 39.47%).
What does a low Revenue per FTE mean?
A low Revenue per FTE might indicate
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inefficiencies in your operations,
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a lack of growth,
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a supply-demand imbalance for the company’s product or service, or
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inefficient or underperforming employees.
It could also indicate a period of conscious investment and growth in the business where you are over resourced and training new employees in preparation for future growth in demand.
What does a high Revenue per FTE mean?
A high Revenue per FTE may indicate a high degree of growth, strong efficiency and productivity of your people relative to the size of the workforce. It suggests that each employee, on average, generates a high amount of revenue for the company.