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.

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.

What does 1.0 FTE mean?

1.0 FTE refers to a full-time employee working standard, full workweeks according to local law. For example, a U.S. employee working 40 hours per week is considered a 1.0 FTE.

A 1.0 FTE can also refer to the equivalent of a full-time employee comprising two or more employees. For example, two U.S. contract workers who put in 20 work hours weekly are 1.0 FTE. Four freelancers working 10 hours a week are also 1.0 FTE.

1.0 FTE is also called FTE 100%.

What does 0.5 FTE mean?

0.5 FTE refers to the workload of a part-time worker, which is often half the hours of a standard full-time workweek. In the U.S., 0.5 FTE equals 20 hours.

0.5 FTE describes part-time employment or cases where the work responsibility is half of a standard full-time workload. Depending on their agreed-upon workloads, it may be used to describe contingent workers, contractors, and freelancers.

0.5 FTE is also called FTE 50%.

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. © 2023 Velocity Global, LLC. All rights reserved.