The Full Time Equivalent (FTE) represents a unit of measurement standardized to equal the number of hours worked by the typical full-time employee.
In practice, FTE is measured by companies to estimate the number of full-time employees employed within a specific time frame.
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FTE, an abbreviation for “full time equivalent”, counts the approximate number of full-time employees employed by a specific company, but with the inclusion of part-time employees.
Employers can use FTE to evaluate their hiring capacity and current payroll, as well as for reporting purposes related to labor laws and employee benefit programs.
The FTE calculation counts part-time employees as a fraction of a full-time employee, most often on the basis of the number of hours worked.
The baseline in order to qualify as 1.0 unit of a full-time employee is set at 40 hours, so a part-time employee that worked 20 hours would be marked as a 0.5 FTE.
Calculating the full time equivalent (FTE) is a four-step process:
The formula for calculating the full time equivalent (FTE) on an annual basis is as follows.
Full-Time Equivalent (FTE) = Total Hours Worked by Part-Time and Full-Time Employees ÷ Number of Available Full-Time Hours in Year
The total hours worked is the sum of the number of hours worked by part-time and full-time employees, whereas the number of available full-time hours in a year is most frequently 2,080.
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The chart below displays the number of weekly hours worked with the corresponding FTE under the standard 40 work-week.
We’ll now move to a modeling exercise, which you can access by filling out the form below.
Suppose a company currently has 50 full-time employees on its payroll, along with 10 part-time employees.
The full-time employees work 40 hours per week and 52 weeks out of the year, meaning that the number of full-time hours worked on an annualized basis is 104,000 hours.
The part-time employees, on the other hand, work 20 hours per week and 25 weeks out of the year.
Using the same formula, the number of part-time hours worked amounts to 5,000 hours per year.
By adding the full-time and part-time hours worked, we can calculate the total number of hours worked by all employees for the year as 109,000.
The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours.
With the required inputs in place, we can arrive at approximately 52.40 FTEs by dividing the total hours worked by all employees by the total number of available work hours in a year.
In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees.
