What is FTE (Full-Time Equivalent? How to Calculate (with Online Calculator) | Traqq Blog

If you’ve been managing employees for some time, you’ve likely come across the term “full-time equivalent”. Perhaps you encountered it while you were getting details about the Paycheck Protection Program loan. On the other hand, you may be wondering if your company is required to provide health insurance according to the regulations of the Affordable Care Act.

Applicable Large Employers (ALEs) must determine their status based on having at least 50 full-time employees or FTEs, and understanding ALE status is crucial for ACA compliance. Whatever the case may be, you need to learn how to calculate FTE salary.

FTE stands for a “full-time equivalent” and is a measurement unit for the total hours worked that equates to the number of full-time employees of a company within a fiscal year. FTE is typically calculated over a certain period, such as a month, quarter, or year, and defining the time period is essential for accurate assessment. Also referred to as whole-time equivalent (WTE), FTE determines the number of people or work hours a business needs to complete a project.

FTE helps organizations understand how many employees are needed to complete the same amount of work, regardless of whether those hours are contributed by full-time or part-time employees. Outside corporate settings, full-time equivalent is also used to measure a student’s involvement in a project or their class load.

Introduction to Full-Time Equivalent

FTE stands for a “full-time equivalent” and is a key metric that organizations use to measure the total work hours contributed by their employees. By converting all employee hours—whether from full time, part time, or temporary staff—into a single, standardized value, businesses can accurately assess their staffing levels and workforce capacity.

Understanding your FTE helps you manage labor costs, allocate resources efficiently, and make informed decisions about hiring and project management. Whether you’re planning for future growth or analyzing current productivity, calculating your full time equivalent fte ensures you have a clear picture of your team’s total work hours and how they align with your business objectives.

What is FTE?

As mentioned above, FTE is a measurement unit for the total hours worked that equates to the number of full-time employees of a company within a fiscal year. Also referred to as whole-time equivalent (WTE), FTE determines the number of people or work hours a business needs to complete a project. Outside corporate settings, full-time equivalent is also used to measure a student’s involvement in a project or their class load.

What Is Full-Time Equivalent Used For?

If you have part-time employees in your company, learning how to calculate FTE will give you an insight into the productivity of your workforce. Here are some of the ways you can use the full-time equivalent calculation:

• Analyzing Employee Performance: While it is important to know the appropriate number of workers, it is also crucial to get insights into your company’s overall performance. Using a full-time equivalent calculator shows your productivity against the number of employees you pay and is useful for performance analysis and evaluating team productivity.
• Efficient Human Resource Management: HR can make more profitable decisions when they are able to calculate FTE. The data is particularly important when managing a company’s workforce. It allows HR practitioners to assess the trends in the job market efficiently. Moreover, the full-time equivalent calculation helps them make appropriate changes to teams to accommodate a company’s needs.
• Easier Project Management: If your workforce is under different employment contracts, you can easily assign projects to people according to their performance. By calculating full-time equivalent, you know who’s more productive regardless of the number of hours they work per week.
• Compliance with Appropriate Labor Laws: Learning how to calculate FTE also allows you to determine which labor laws apply to your business operations. FTE calculations help ensure compliance with legal requirements and correct employee classification.
• Accurate Productivity Comparison: If you want to compare the different productive capabilities of departments and companies, you can easily do so by calculating FTE. After all, you may get inaccurate data when you use the number of employees alone as a basis for performance evaluation. Comparing FTEs allows you to assess weekly hours worked and determine which employees have full time status, as FTE 100% typically indicates a full-time employee working standard hours.

How to Calculate FTE

This section provides a step-by-step guide to calculating FTE (full-time equivalent). The process is hours based, using employee work hours to determine FTE for your workforce.

1. Create a List of Your Employees: Compile a list of all employees who received a W-2 at the end of the year. Exclude 1099 contractors. Also, subtract any leave hours that were approved, such as paid time off or sick leave.
2. Determine Full-Time Work: Companies typically consider a full time workweek to require 40 hours of work per week. Any employee who works 40 hours or more is considered a full-time worker, while any employee who works fewer than 40 hours is considered a part time employee. However, if your company defines 30 hours as full-time, any schedule less than that is also considered part-time.
3. Calculate Total Hours Worked: There are 52 weeks in a year. Multiply the number of hours worked per week by 52 to find the total annual hours worked. This is called an annual hours based approach.
4. Add Full-Time Employees’ Hours: Add up the total hours worked by all full-time employees on your list.
5. Add Part-Time Employees’ Hours: Do the same for part-time workers on your list.
6. Determine Part-Time Full-Time Equivalents (FTE): To calculate part-time FTEs, divide the total number of hours worked by part-time employees by the number of annual hours a full-time employee typically works (calculated in Step 3).
7. Calculate Total Full-Time Equivalent (FTE) Count: Combine the part-time and full-time FTE counts to obtain the total FTE for a given position. To determine the FTE for a single employee, divide their actual hours worked by the full-time hours definition (e.g., if full-time is defined as 40 hours, then a part-timer working 35 hours has a 0.875 FTE and a part-timer working 30 hours has a 0.75 FTE).

Example calculation for monthly FTE:
Suppose a full-time workweek is 40 hours, so a full-time worker works 160 hours per month (40 hours x 4 weeks). If a part time employee works 80 hours in a month, their monthly FTE is 80 ÷ 160 = 0.5.

It can be difficult to calculate FTE if you don’t have a systematic way of monitoring the number of hours your employees work per week. You may use the traditional Bundy clock or ask your workers to maintain a spreadsheet for attendance. However, these methods can be inconvenient and inaccurate. Your HR personnel may have to manually calculate total billable hours per month and may end up making mistakes.

FTE Calculation Formula

Let’s break down the formula to calculate full time equivalent employees (FTE). This formula converts the total hours worked by both part time and full time employees into full time equivalent employees, allowing you to estimate their combined contribution to workload and budget.

FTE Calculation Example Scenario

To begin calculating FTE, start by identifying every individual who contributes to your organization’s work, including full time employees, part time employees, and temporary or contract workers. For each person, record the number of hours they work per week, including regular working hours, overtime, and any periods of leave or absence.

This comprehensive approach ensures you capture the total hours worked by each employee, which is essential for determining their FTE value. By tracking the working hours of all staff, you can accurately calculate your total hours worked and gain a clear understanding of your workforce’s true capacity. Let’s take a look at an example scenario to help you better understand how to do this.

1. Identify your employees and the hours they work

A company has six employees. Three of them work 40 hours a week, two work 25 hours, and one works 15 hours.

2. Define what constitutes full-time

We’ll consider 40 hours per week to be full-time for this example (i.e. four employees each working 10 hours a week could collectively contribute to one full-time equivalent (FTE) position).

3. Compute the annual hours

• For the 40-hour workers: 40 x 52 = 2080 (1 FTE)
• For the 25-hour workers: 25 x 52 = 1300
• For the 15-hour worker: 15 x 52 = 780

4. Sum all full-time hours

2080 + 2080 = 4160 (3 FTEs) 

5. Sum all part-time hours

1300 + 1300 = 2600 (2 FTEs). 

6. Calculate the part-time FTE

Divide the total hours worked by part-time employees by the yearly full-time hours:

3,380 hours / 2,080 hours = 1.625 FTE.

7. Determine the total FTE

Combine the full-time FTE with the part-time FTE

• Three full-time employees equate to 3.0 FTE.
• The part-time FTE is 1.625.

Hours and Scheduling

Hours and scheduling are fundamental to accurate FTE calculations. Every business should establish what constitutes full time hours—most commonly 40 hours per week—and use this as the benchmark for measuring all employee contributions. It’s important to track the actual hours worked by each employee, including those on part time schedules or temporary assignments, as well as any overtime or absences.

By applying the following formula, you can determine the FTE value for each employee: FTE = (Total hours worked / Standard full time hours)

For example, if an employee works 30 hours per week and your standard full time schedule is 40 hours per week, their FTE would be 0.75. This calculation allows you to assess your total workforce capacity, manage labor costs, and ensure compliance with labor laws. Accurate FTE calculations are a key metric in workforce planning, helping you make informed decisions about staffing levels and resource allocation to meet your business goals.

40-Hour Work Week Full Time Equivalent Chart

The chart shows the number of hours worked each week, along with the corresponding Full-Time Equivalent (FTE) based on a 40-hour work week.