FTE is a way to measure how many full-time employees you have in your business. This is useful for budgeting and planning.
If you have 10 FTEs working for you, it might not mean that you have 10 employees. You can, for example, have 5 full-time employees and 10 employees working part-time.
Together they add up to 10 full-time employments.
The full-time equivalent is used for planning, budgeting and productivity measurement in a business, as well as labor market statistics.
An example of FTE
For example, if a company announces that it is reducing the workforce by 30 FTEs, it doesn’t necessarily equate to laying off 30 individuals. Rather, it is the number of full-time jobs that’s being reduced.
If the company has a lot of part-time employees, more than 30 individuals could be laid off. If the company has a lot of employees working overtime, it could be less than 30 individuals.
Why does FTE matter?
Full-time equivalent is used to assess staffing needs, measure productivity, budgeting, and for labour market statistics and economic reports.
In the planning of large-scale projects, for example in construction, knowing the FTE requirement is necessary to determine the resources needed to complete the project by the deadline.
The FTE also comes into play when it comes to compliance and rules and regulations. For instance, certain financial reporting or legal obligations may be triggered when a business exceeds a specific number of FTEs.
How to calculate the FTE
Let’s say the full-time work week in your business is 40 hours. An employee who works 40 hours per week has an FTE of 1.0.
Example 1
To find the FTE-rate for a part-time employee, you take the amount of hours worked and divide it by the number of hours that the employee works.
FTE = (the number of hours worked) / (full-time working week)
If you have an employee who works 10 hours per week, their FTE would be 10 divided by 40 = 0.25.
If you have 4 employees working 10 hours per week, it amounts to your business having 1.0 FTE in total.
Example 2
Let’s take another example. You have a team of five people, 3 of them work full-time, and 2 work part-time, 10 hours each.
You would add up the total sum of hours, in this case 40+40+40+10+10 = 140. Then you divide that by a full-time working week, which is 40 hours.
140 / 40 = 3.5 FTE. Your five workers are equal to 3.5 full-time employees.
