FTE (Full-Time Equivalent)

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FTE (Full-Time Equivalent)
 

What is the meaning of FTE? 

FTE, or “Full-Time Equivalent,” is a unit of measurement equivalent that refers to the number of hours worked by one employee on a full-time basis. Simply put, FTE is the measurement of an employee’s workload. By using the FTE concept, a company can convert the hours worked by several part-time or contract employees into the hours worked by full-time employees. 

How do you calculate FTE? 

Generally, a regular workload of a full-time employee is 8 hours a day for five days a week. In total, this is 40 hours per week. This is the usual work schedule of many businesses in the United States.

If you use the FTE representation for employers with a 40-hour work schedule, a regular day’s work of one full-time employee (8 hours a day) is represented as 1.0 FTE. Similarly, an employee who works only 20 hours per week is 0.5 FTE. 

Let’s break the calculation step by step. To calculate FTE, divide the employee’s scheduled hours divided by the employer’s hours for a full-time workweek. 

                FTE = Total Hours Worked in a Week
                           Total Hours for a Full-Time Workweek

Let’s have an example:

Let’s say a company’s total hours for a full-time workweek is 40 hours. A part-time employee works 10 hours. Using the formula above:

            FTE = 10 hours
                       40 hours

In this example, the employee would be 0.25 FTE. 

What are the benefits of calculating FTE? 

Organizations use FTEs to know the workload of their employees. More importantly, using FTE allows them to find out how many part-time or contract employees and the hours that they work compare to full-time equivalents. By converting the number of hours worked by part-time employees into full-time equivalents or FTE, the company can find out how many full-time employees the part-time employees are equal to.

Using FTEs allows companies to analyze the work effectiveness of part-time employees based on their work contributions. Businesses can more accurately set work metrics and benchmarks. Also, FTE can be used for accounting purposes, computing wages, and calculating company expenses. 

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