The Meaning Behind FTE And Why It Matters To Your Business

Just to start with the basics, FTE stands for “full-time equivalent” and is a unit of measurement used to calculate the number of hours worked by one full-time employee. It’s a way to standardise the hours worked by both part-time and full-time employees, making it easier to compare and analyse workforce data.

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It quantifies the work an employee performs, regardless of whether they are full-time or part-time. 

FTE is commonly used in various contexts, including employee workload, student enrollment, and project management. In the context of employee workload, FTE measures the number of hours employees work in a given period, usually a week or a year. 

To calculate FTE, you simply divide an employee’s scheduled hours by the hours in your organisation’s official full-time workweek. For example:

• Employee A works 20 hours per week
• Your full-time workweek is 38 hours
• Employee A’s FTE = 20 / 38 = 0.53 FTE

So, Employee A represents 0.53 FTE, or just over half of a full-time employee.

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• It provides a clear picture of the actual hours worked by your team, regardless of whether they are part-time or full-time
• It streamlines accounting processes like estimating wages, payroll costs and budgeting
• Many government programs and benefits use FTE to determine eligibility and calculate entitlements

A full-time employee typically works a standard full-time schedule, usually around 40 hours per week, fulfilling the responsibilities of a full-time position. In contrast, part-time workers often work fewer hours, typically less than 30 hours per week.

By calculating FTE, you can gain insights into your workforce that simple headcount numbers don’t provide. You can see the true labour resources going into your operations.

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1. Make a list of all your employees
2. Determine your standard full-time workweek hours (e.g. 38 hours)
3. Calculate each employee’s individual FTE using this formula:

• Employee’s scheduled hours / Standard full-time hours
• When calculating FTE for part-time employees, it is important to consider their total annual hours in relation to the standard annual hours worked by a full-time employee.

1. Add up the individual FTEs, considering the annual hours worked, to arrive at your total organisational FTE

For example, let’s say you have three employees:

• Employee A works 38 hours (1.0 FTE)
• Employee B works 25 hours (0.66 FTE)
• Employee C works 19 hours (0.5 FTE)

Your total FTE would be 1.0 + 0.66 + 0.5 = 2.16 FTE. Even though you have three employees, their combined hours are equivalent to 2.16 full-time employees. Your total FTE represents the combined hours of all employees, providing a clear picture of the workforce contributions across the entire organisation.

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For example, an employee who is considered 0.5 FTE may be eligible for half the benefits of a full-time employee. Additionally, FTEs are used to calculate employee productivity and other metrics, such as labour costs and revenue per employee. 

By accurately tracking FTEs, organisations can make informed decisions about staffing, benefits, and resource allocation. This ensures that benefits are distributed fairly and that the organisation can optimise its workforce to meet business needs effectively.

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• Compare FTE to your total employee headcount to understand the mix of part-time and full-time staff within the same period
• Track FTE over time to identify trends and changes in labour resources
• Break FTE down by department, role, employment type, etc., to see the distribution across your organisation
• Benchmark your FTE metrics against industry averages to see how you compare to peers

Visualising your FTE data in charts and graphs can help highlight important patterns and make the insights clearer and more actionable.

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• Analyse FTE to determine optimal staffing levels and team structures
• Identify areas that may be over or understaffed based on FTE ratios, considering the contributions of full-time workers
• Use FTE to plan and budget for future hiring and resource allocation
• Find the right balance of full-time and part-time employees to meet business needs while controlling costs.

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• FTE represents the hours worked by one full-time employee in your organisation
• Calculating FTE provides a standardised view of your workforce's labour output
• 1.0 FTE is equal to one employee working your organisation's full-time hours, typically 38-40 hours per week
• Analysing FTE data helps with budgeting, resource planning, and performance optimisation
• Using FTE in workforce planning leads to more informed decision-making and better organisational outcomes.

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What is the difference between FTE and headcount?

Headcount is the number of individual employees regardless of hours worked, while FTE is the hours worked expressed in terms of full-time employees. For example, two employees working 19 hours per week each would have a headcount of 2 but an FTE of 1.0.

How do you convert part-time employees' hours to FTE?

To convert part-time hours to FTE, divide the part-time hours by your standard full-time workweek. For example, an employee working 25 hours with a full-time workweek of 38 hours would be 0.66 FTE (25 / 38 = 0.66).

What is a 0.5 FTE in terms of hours per week?

A 0.5 FTE represents half of a full-time workload. So if your full-time workweek is 38 hours, 0.5 FTE would be 19 hours per week (38 x 0.5 = 19).

Is overtime included in FTE calculations?

No, overtime is not typically included in FTE calculations. FTE is based on an employee's standard scheduled hours, not actual hours worked. Overtime would be tracked and analysed separately.

How is FTE used for costing purposes?

FTE is often used to allocate labour costs and overheads in budgeting and financial reporting. By expressing labour in terms of FTEs, costs can be standardised and compared more easily across the organisation. FTE costing helps determine the true cost of labour.