FTE meaning: how to calculate full-time equivalent
By Indeed Editorial Team
Updated 13 September 2022
Published 3 January 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Companies sometimes have various employees who work a different number of hours each week. This is usually the case when an employer has several part-time staff. FTE is a metric used to overcome the complications associated with varying employee hours so employers can make informed decisions regarding payroll and budget projections. In this article, we explain the FTE meaning, discuss why it's important and how you can calculate it.
The FTE meaning is full-time equivalent and is the standardised method of measurement that represents the number of hours worked by an individual in one week. Whole-time equivalent (WTE) has the same meaning as FTE and it applies in various contexts, including students in education or employees working for businesses. FTE allows employers and others to develop a single metric for comparing how much each person is working compared to the full-time average.
To calculate FTE, you start by determining what a full-time working week is. This could be 40 hours or 35 hours, depending on the company, its policies and location. Once you have this figure, you can use simple ratios that designate a full week as having a value of one and all others are relative to this. For example, if a full week is 40 hours, then this has an FTE value of 1.0, and a person working 20 hours would have an FTE value of 0.5. This gives employers an easy standard and reference for managing payroll and other aspects of work.
Why is FTE important?
FTE is important because it helps companies calculate how many full-time employees their part-time employees are equivalent to. This means that companies can determine the effectiveness of part-time staff based on how much work they've managed to complete by comparison. FTE also gives you a standard measure of employee availability, making it easier to allocate personnel and track employee pay. Here are some other reasons why FTE is important for businesses:
Calculations help employers determine an employee's annual salary or monthly wages, irrespective of whether they work on a full or part-time basis.
It's useful in project management as it allows individuals to calculate personnel requirements based on the number of hours a project is going to require.
It helps compare revenue to the businesses' count of full-time employees (or the equivalent), allowing employers to determine how many full and part-time employees are going to help them meet their goals.
It helps calculate an employee's personal time off (PTO) accrual, but it doesn't account for factors that may affect this, such as how many years they've worked for the company. Knowing how many employees you can allocate to a project and the implications this has on payroll means that you're constantly aware of your finances and remain on budget.
Many departments, such as human resources and project management teams, use FTE to aid recruitment and wages and organise employees respectively. It's also important that staff are aware of whether or not they're a full-time employee to avoid confusion and help clarify their work duties and responsibilities.
What is an FTE employee?
FTE represents the number of full-time hours worked in a week. An FTE employee refers to the total number of employees that make up an FTE. For example, most employers require full-time employees to work 35 to 40 hours per week. If an employee works 35 hours per week, they represent one FTE.
Alternatively, if an employee is scheduled to work only 17.5 hours per week, they represent 0.5 FTE. This is because it would take two employees working 17.5 hours to equal the 35-hour full-time requirement. Two employees working 17.5-hours weeks would jointly constitute one FTE. Similarly, you can express multiple part-time employees working different numbers of hours per week in terms of FTE.
How to calculate FTE
Follow these three steps to calculate full-time equivalent:
1. Determine what you mean by full-time
A full-time employee typically works between 35 and 40 hours. Their employment contract stipulates this, with the precise amount varying between businesses. Additionally, some companies choose to classify full-time according to a weekly amount of hours, while others run on monthly or annual full-time quotas. Determine what full-time means for you by establishing how many hours the organisation requires full-time employees to work on a weekly, monthly or annual basis.
2. Calculate the number of full-time hours
Break down your full-time hours into daily and weekly metrics. For example, if you decide that 35 hours per week qualifies as full-time and you have five working days in the week, then full-time employees are going to work seven hours per day. This matches the formula:
workday hours x working days in a week = full-time hours
If you want to work out the monthly or annual amount of full-time hours, then you would multiply the number of weekly hours by how many weeks there are in a month or year. In the case of a full year, your calculation would be:
35 x 52 = 1,820 full-time hours per year
It's also important to note that the annual figure isn't always going to be perfectly accurate. This is because it's subject to deductions for holidays, sick leave, sabbaticals and other factors that require employees to take time off. Remember that FTE only refers to the number of hours worked, not how many employees are working at the organisation. Therefore, it doesn't matter if you ask five employees to work seven hours per week to make up the 35 full-time hours. This still equates to one FTE.
3. Use that full-time determination to calculate each employee's FTE
Calculate the employee's FTE by using the following formula:
employee FTE = number of scheduled hours per week / full-time workweek hours
For example, you might have an employee scheduled for 17 hours and a full-time workweek consisting of 35 hours. This means the employee's FTE is 0.485, from the calculation 17/35 = 0.485. If another employee works 18 hours a week, then together they form one FTE. This way, each employee gets a decimal score in proportion to the hours they work in a given week. It's also possible to express employee FTE as a percentage, although this isn't usually common practice. By this logic, 100% FTE is equivalent to 1.0 FTE and 75% FTE is equivalent to 0.75 FTE.
Related: 16 part-time jobs that pay well
FTE calculation examples
Here are some examples of FTE calculations to help you understand the formula:
Sports Clothing 101 is undertaking a new clothing project that requires approximately 700 hours of work. Sports Clothing 101 requires full-time employees to work no more than 35 hours. The manager uses the following FTE equation: 700 (total project hours) / 35 (hours in the workweek) = 20. This means that having 20 employees working seven hours a day allows the company to meet the project hours in one week. Seven hours a day comes from the fact that 35 hours split across five working days equals seven.
To add to the scenario, the company only has 15 full-time (35 hours per week) employees and two part-time (17.5 hours a week) employees. This means that the brand only has a total 16 FTE. The FTE equation 700/16 determines that it would take the employees approximately 44 hours a week to complete the task – which is nine hours more than the full-time requirement. Therefore, Sports Clothing 101 wants to hire four more full-time staff (or four FTEs) to achieve this clothing project in the allotted time frame.
A manager wants to use FTO to calculate an employee's annual salary. He first determines that full-time is equivalent to 40 hours per week at the organisation. The employee in question, 'Harry', works 30 hours per week. By dividing 30 by 40, he determines that Harry's full-time equivalent is 0.75. A full-time employee with Harry's role earns £60,000 per year. The manager multiplies this figure by 0.75 to determine Harry's annual salary. The final figure, based on using FTE, is:
60,000 x 0.75 = 45,000
By using FTE, the manager determines that Harry's annual salary is £45,000 per year. This is based on one FTE corresponding to £60,000, with Harry scheduled to work 30 hours per week.
Disclaimer: The model shown is for illustration purposes only, and may require additional formatting to meet accepted standards.
Explore more articles
- What is CTOR? (Why it matters and how to improve it)
- What is crowdsourcing in marketing and how does it work?
- What is business forecasting (with definition and methods)?
- 14 novel writing tips to help you finish your book
- How to engage employees (and the benefits of doing so)
- What is organisational commitment? (Plus examples and tips)
- 7 useful tips for mediators (with definition and FAQs)
- A guide to accessibility audits: benefits and how to run one
- What are team norms? (With definition, steps and examples)
- What is a vulnerability assessment? (With steps and types)
- Demand-side platforms: What are they, and how do they work?
- What does DNS server unavailable mean and how to fix it?