What is a full-time equivalent

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.

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.

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)

For example, when an employer has a 40-hour workweek, employees who are scheduled to work 40 hours per week are 1.0 FTEs. Employees scheduled to work 20 hours per week are 0.5 FTEs.

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.