What Is FTE (Full-Time Equivalent)?
FTE, or Full-Time Equivalent, is a unit that measures an employee’s workload in a way that makes workloads comparable across various contexts. It is commonly used to standardize working hours for part-time, full-time, and contract employees by converting their work time into a percentage of a full-time schedule. One FTE typically equals 40 hours per week, or the standard full-time schedule set by a company.
How to Calculate FTE
To calculate FTE, divide an employee’s total number of hours worked by the full-time hours defined by the employer (usually 40 hours/week). For example, an employee who works 20 hours per week would be 0.5 FTE. Two employees working 20 hours each would together equal 1.0 FTE.
Why FTE Matters in Business
FTE is crucial for workforce planning, budgeting, project management, and compliance. It helps organizations determine staffing needs, monitor productivity, and comply with regulations related to employee benefits, tax reporting, and healthcare coverage.
FTE in Human Resources and Finance
HR departments use FTE to assess headcount and determine benefit eligibility. Finance teams rely on FTE to analyze labor costs, allocate resources, and evaluate cost efficiency. It also plays a role in calculating labor ratios for performance benchmarking.
FTE vs. Headcount
While headcount measures the number of individual employees, FTE reflects the actual amount of labor contributed. For example, four half-time employees would count as four in headcount, but only 2.0 in FTE.
Use Cases for FTE
