What Is FTE (Full Time Equivalent)?

FTE (full-time equivalent) refers to the unit of measure that helps businesses calculate the number of hours their employees work.

FTE expresses the full workload of multiple part-time or temporary employees in terms of the hours a full-time employee works.

Companies commonly use FTE to determine their employees’ workload and use that data in many beneficial ways.

Employees considered full-time equivalent employees work a standard, full workload weekly, governed by local law. For example, an FTE employee in the U.S. works 40 hours a week.

FTE can also be called WTE or whole-time equivalent.

What is considered a full-time employee?

A full-time employee generally works a standard number of hours per week as defined by their employer or local labor laws. While the exact number of hours can vary by country and organization, full-time employment generally ranges from 35 to 40 hours per week.

In many countries, full-time employees are entitled to certain benefits, such as health insurance, paid time off, and retirement plans. The distinction between full-time and part-time status is crucial for determining eligibility for these benefits and for calculating FTE.

What does 100% FTE mean?

One hundred percent FTE represents a full-time work schedule, typically equating to 40 hours per week in many countries, including the U.S. This standard is commonly used in job contracts, project planning, and budgeting to indicate a complete workload.

The percentate of FTE also translates into multiples, with 100% FTE commonly written as 1.0 FTE. Not only does this represent a full-time employee working standard hours according to local law, but it can also reflect multiple part-time workers whose combined hours equal a full-time schedule. For example, two contractors working 20 hours each or four freelancers working 10 hours each would constitute 1.0 FTE.

Other common FTE percentages and their corresponding multiples include:

75% FTE (0.75 FTE): Equals three-quarters of a full-time schedule, typically 30 hours per week in the U.S.
50% FTE (0.5 FTE): Represents half of a full-time workload, usually 20 hours per week in the U.S. This designation commonly applies to part-time employees, contractors, or freelancers working half the standard hours.

Project managers use these FTE measurements to allocate resources effectively across projects and track workforce utilization. This standardized approach helps organizations maintain consistent workload distribution and accurate time estimation, regardless of whether the work is performed by full-time employees or a combination of part-time workers.

How do HR teams use FTE?

HR teams calculate full-time equivalent to quantify their workforce by converting the work schedules of part-time, contract, freelancers, and other contingent workers into a single unit—FTE.

HR teams primarily use full-time-equivalent (FTE) to make informed decisions when undergoing strategic workforce planning, budgeting, and resource management.

Here are some common scenarios when and why HR uses FTE:

Cost planning

HR uses FTE to estimate labor costs accurately. By converting various types of employment (full-time, part-time, temporary) into FTE, organizations can create more consistent and comparable measures for budgeting purposes.

Do you want to calculate how much it costs to hire an employee abroad? Use our employee cost calculator to get estimated payroll costs for your global team.

Workforce planning

FTE helps HR plan for the organization’s future workforce needs, both in the short-term for projects and the long-term. It provides a standardized way to assess staffing levels, identify gaps, and prepare for recruitment or restructuring.

Resource allocation

The full-time equivalent measurement is valuable for distributing resources effectively. HR can use FTE calculations to allocate headcount to different departments or projects based on workload and priorities.

Department comparison

FTE allows HR to compare workloads and staffing levels across a company’s units or departments, ensuring equitable distribution of resources.

Benefits administration

Full-time equivalent is used in benefits administration to determine eligibility for certain benefits. For example, employees workers who work a certain percentage of full-time hours may be entitled to some statutory employee benefits as mandated by law.

Productivity and efficiency analysis

HR teams can use FTE to assess productivity and efficiency. By understanding the full-time equivalent workload, HR can identify areas for improvement or optimization.

Policy compliance

Some regulations and policies are tied to the number of full-time equivalent employees an organization has. HR uses full-time equivalent to ensure compliance with labor laws and other regulations.

Contracting and outsourcing decisions

When considering outsourcing or contracting for specific tasks, HR may use FTE to evaluate the cost-effectiveness and feasibility of such arrangements compared to hiring additional in-house staff.

Government program eligibility

Employers and employees may qualify for certain government programs based on FTE calculation. For example, U.S. companies may use FTE to determine whether they or their employees qualify for the following programs:

Affordable Care Act (ACA)
Applicable Large Employer (ALE)
Family and Medical Leave Act (FMLA)
Paycheck Protection Program (PPP)
Small Business Administration (SBA) Programs
Work Opportunity Tax Credit (WOTC)

Company data comparisons

Some organizations assess their FTE next to competitors’ to find out where they stand in comparison. This can show leadership teams how to stay competitive regarding productivity, team structure, company size, and other benchmarks.

How to calculate FTE

Calculating FTE involves simply adding the hours of full-time, part-time, and contingent employees into measurable ’full-time’ units.

Add your employees’ total amount of hours worked in a week.
Divide the total amount of hours worked by 40 hours (or the standard full-time workweek based on local law).
Round up to two decimals—this is your FTE.

FTE calculation example

Imagine you have four U.S. employees on your social media team with different work schedules:

Employee A: Works 40 hours per week (full-time).
Employee B: Works 30 hours per week (part-time).
Employee C: Works 20 hours per week (part-time).
Employee D: Works 20 hours per week (part-time).

Here’s how to calculate your team’s FTE following the steps above:

40 hours + 30 hours + 20 hours + 20 hours = 110 total hours worked
110 total hours worked / 40 hours in a standard work week = 2.75 FTE
Your social media team worked the equivalent of 2.75 full-time employees.

Calculating FTE-based salary

FTE-based salary calculations play a crucial role in budgeting and compensation strategies. To calculate a part-time employee’s FTE salary, divide their actual hours worked by the standard full-time hours and multiply by the full-time salary.

For example, if a full-time position in the U.S. pays USD $50,000 annually for 40 hours per week, a 20-hour per week employee would earn $25,000 (0.5 FTE).

Unlike hourly wages, FTE salaries provide a consistent income regardless of slight variations in hours worked. This method also helps determine benefits eligibility, as many companies offer full benefits to employees working above a certain FTE threshold, typically 0.75 or higher.

FTE vs. headcount

FTE and headcount are distinct metrics used in workforce management. Headcount represents the total number of individuals employed, while FTE reflects the equivalent number of full-time workers based on hours worked.

For instance, a company with 10 part-time employees working 20 hours per week would have a headcount of 10 but an FTE of 5.

HR professionals use both metrics: FTE for budget planning and workload distribution and headcount for tracking actual personnel numbers.

These metrics inform strategic decisions such as staffing adjustments and resource allocation. In government reporting, businesses may need to provide either FTE or headcount figures depending on specific regulations or program requirements.

The importance of calculating FTE for HR teams

FTE aids in workforce planning, budgeting, benefits administration, and resource allocation. This unit of measure enables HR teams to evaluate staffing needs, assess competition, compare productivity, guarantee compliance, and ensure eligibility for federal programs.

Companies that utilize full-time equivalent make smart decisions about hiring, benefits, and compliance. Calculating FTE can be crucial to an organization’s overall health and success.

Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. © 2024 Velocity Global, LLC. All rights reserved.