What is a full-time equivalent (FTE)
A full-time equivalent (FTE) is a standard unit that measures the workload of an employee and indicates how many hours an individual working in a full-time capacity is expected to complete in a year. In Australia, this figure is typically calculated based on the nationally recognized full-time working hours.
Calculating full-time equivalent
To calculate the FTE, you consider the standard working days in a year, subtracting annual leave entitlements and public holidays to determine the net working hours. For instance, a standard workweek might be 38 hours over five days, and annual leave is generally four weeks in Australia, in addition to public holidays.
Use and significance of full-time equivalent
The concept of FTE is widely used in various contexts, including labour market statistics, economic reports, and in assessing business staffing needs. For example, when a company announces it is reducing its workforce by 30 FTEs, it does not necessarily equate to laying off 30 individuals. More part-time workers could be affected because it’s the total number of equivalent full-time hours that is being reduced, not the headcount.
FTE in project planning and HR management
In the planning of large-scale projects, such as in construction or retail, understanding the FTE requirement is crucial for determining the personnel resources needed to complete the project within a given timeline.
The FTE figure also comes into play in compliance and regulatory frameworks. For instance, certain financial reporting or legal obligations may be triggered when a business exceeds a specific number of FTE employees.
How to calculate an FTE?
The full-time equivalent can differ based on location or sector. To ascertain the FTE for a particular position or industry, you can employ this basic formula:
FTE = (number of total working hours in a week) x (number of weeks worked per year)
To adjust this calculation for part-time, casual, or contract workers, you would fractionally reduce the number based on their contracted hours relative to a full-time schedule.