Describe the difference between budgeted FTEs, replacement FTEs, and indirect work hours.
Full-Time Equivalents (FTE) are the unit used to measure the work of a single full-time employee for a year. Therefore, 1.0 FTE equals one employee working 40 hours per week for 52 weeks of the year, equaling a total of 2,080 hours. The FTE can be divided to the equivalent of different work levels, such as an employee working 3 – 12 hour shifts is working 36 hours per work. While this is considered a full-time employee, it is not a full 1.0 FTE. Instead, it is 0.9 FTE as seen by dividing the hours worked by the full FTE of 40 (36 / 40 = 0.9). This works the same with any number of work hours, 20 / 40 = 0.5 FTE, or 32 / 40 = 0.8 FTE.
Since FTEs are used to calculate the number of hours needed to do a job, they must be budgeted to know how many hours are needed to perform the designated job. The budgeted FTEs will help to determine the expected total cost of labor for a unit, facility, or project.
The standard employee does not work a constant 40 hours per week for 52 weeks of the year. The employees will have sick time, vacation, and holidays. There will also be mandatory education and training as well as meetings to attend. Replacement FTEs are calculated to determine the staffing needs and cost of replacing these absences. These are forecasted from previous years and usually are provided from the facility Human Resources (HR) department.
Indirect hours are time that is not spent for the provision of direct patient care or in the process of the normal work assignment for the employee. This includes time such as orientation, training, and education, or meetings and special projects. This time can be calculated into the budget from figures also provided by HR.
Brown, P., & Chapman, S., Eubank, G. (2021). Chapter 5, Budgeting. In Leger, J. M. (Ed.) Financial management for nurse managers: Merging the heart with the dollar (5th ed) (pp. 83-102) https://bibliu.com/app/#/view/books/B1BPN02BMBJH1/epub/EPUB/xhtml/037_Ch05_01.html#page_84
Full-time equivalents (FTEs) and indirect work hours are used in budgeting and staffing in healthcare and many other sectors. Let’s break down each term:
Budgeted FTEs: This refers to the number of full-time equivalent positions that have been included in the budget for a particular department or unit. A full-time equivalent equates to one full-time employee, which is typically 40 hours per week in the United States. For instance, if a unit has budgeted for 20 FTEs, that means they have budgeted for the equivalent of 20 full-time employees. However, this could include a mix of part-time and full-time staff as long as their combined hours equal those of 20 full-time workers.
Replacement FTEs: Replacement FTEs are those designated to cover for vacancies, leave, or any other absences of the regular staff. This includes covering for vacations, illness, personal time off, professional development, etc. These FTEs are not additional to the total number of employees but rather provide flexibility within staffing schedules to ensure that patient care or business processes are not interrupted.
Indirect Work Hours: Indirect work hours refer to those hours that are not directly associated with patient care but are essential to the operations of the unit. These might include administrative tasks, staff meetings, training, quality improvement initiatives, etc. They are typically not tied to a specific patient or service but contribute to the overall function and quality of the unit.
Understanding these different terms is essential for nurse leaders in charge of creating and implementing budgets, as well as maintaining a productive and efficient work environment. They help nurse leaders determine the appropriate staffing levels and work distribution needed to provide high-quality care and meet organizational goals.
Leger, J. M. (2023). Financial Management for Nurse Managers. Burlington, MA: Jones & Bartlett Learning.