What Is Full Time Equivalent (FTE) and How to Calculate It?

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. Whatever the case may be, you need to learn how to calculate FTE salary.

What is FTE?

FTE acronym stands for a “full-time equivalent”. 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.
• 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.
• 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.

How to Calculate FTE

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 position to require 40 hours of work per week. Any employee who works fewer than 40 hours is considered part-time. 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.
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. CalculateTotal 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 an individual position, 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).

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 ftes:

FTE Calculation Example Scenario

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.

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.

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.