What Does FTE Stand For?
FTE or full-time equivalent is a tool to help you gauge the potential productivity of your business or company.
It’s used to determine the overall number of full-time hours that your team or business as a whole is able to perform or has performed during a certain period of time.
A single full-time employee represents an FTE of 1, while part-time employees have a 0.5 FTE (or half that of a full-time worker).
FTE allows companies to assess workforce capacity and the real performance of their team, the individuals within that team, entire departments, or even the company as a whole.
There are various reasons why understanding the meaning of FTE and calculating it is essential, ranging from budget considerations to ensuring compliance with legal requirements set by the IRS or other government agencies.
So, whether you're a business owner, HR professional, or just curious about how work can be measured, understanding how to calculate FTE is a crucial part of effective workforce management. Let’s see how you can do it.
How To Calculate FTE?
Calculating FTE is not that complicated. All you need to do is follow these 6 easy steps.
Side note: This calculation is based on the assumption that full-time employees work ideally 2,080 hours per year. Also, the value of FTE=1, as a basis of our calculations, presumes that the work schedule for a full-time employee is 8 hours per day, five days a week (or 40 hours in a week).
If that’s not the case in your country or state, just adjust the numbers to reflect the labor laws you adhere to and your business practices. For example, if your full-time employee is obligated to work only 30 hours a week, you should use that number in your calculations instead of 40, as in our case.
Here’s the full list with all six steps before we go into further details:
- Make a list of all your employees
- Add their employment type (full-time or part-time)
- Sum up all the work hours
- Discover the total number of work hours per week
- Calculate the ideal FTE
- Calculate your actual FTE
Step 1: Make a List of All Your Employees
The first step to calculating the FTE of your company is to make a list of all of your employees.
The list should contain the names of your employees as well as the full number of work hours for a single week. Try to include employee leave (both paid and unpaid) in the overall number of work hours to make your results more accurate. These numbers will be the groundwork for your FTE calculation.
After you’ve done that, your list should look something like this:
Step 2: Full-Time vs Part-Time Employees
For the most part, employees that work anywhere between 30-40 hours a week are considered full-time employees. For the purposes of this calculation, we’ll assume that a 40-hour work week constitutes full-time employment (or FTE = 1).
This leads us to the second step in calculating your FTE: divide your staff into full-time and part-time employees.
The easiest way to do this is to add another column to the list. Once you’ve done that, it should look something like this:
