As your company expands across borders and boundaries, keeping track of employee performance can be challenging. Understanding your company’s Full-Time Equivalent (FTE) is key to evaluating how part-time and full-time employees are performing, allocating resources, and creating accurate project timelines.
What exactly does Full-Time Equivalent mean? A best-in-class Employer of Record (EOR) seamlessly simplifies the complexities of employment, empowering teams with reporting and analytics tools to help calculate FTE and manage team members anywhere in the world — without setting up new entities.
Let’s explore what Full-Time Equivalent (FTE) means, and why a comprehensive FTE breakdown is key to strategic planning.
What is Full-Time Equivalent (FTE)?
Full-Time Equivalent (FTE), also known as Whole-Time Equivalent (WTE) or Work-Year Equivalent (WYE), is a unit of measurement used by businesses to calculate the number of hours worked by all employees — including full-time, part-time, flexible, temporary, and as-needed employees.
An FTE represents the workload of an employee in terms of full-time hours. An FTE of 1.0 is the equivalent of a full-time employee. An FTE of 0.5, on the other hand, signals that the employee is only part-time or half-time.
Most companies not only employ full-time employees but also leverage part-time employees or 1099 workers. The FTE allows you to calculate the hours worked by these team members compared to a full-time workload.
How is FTE calculated?
To calculate Full-Time Equivalent (FTE), the first step is to define what constitutes a full-time working week. Then, list employee hours, total those hours, calculate the FTE for part-time employees, and sum the FTE. Follow these steps when calculating full-time equivalent employees:
1. Define full-time hours. Decide what counts as a full-time workweek for your company. Typically, full-time employees work 40 hours per week, or 2,080 hours per year (40 hours x 52 weeks), but some countries have different standards. For example, 40 hours a week in the UK differs from the standard 35 hours in France — it’s important to use a unified full-time workweek across all countries where your company operates. A unified approach ensures consistent and accurate FTE calculations.
2. List employee hours. Make a list of all employees and the total hours each person worked during the year. Create separate lists for full-time and part-time employees. Exclude contractors.
3. Adjust for leave. Subtract any hours employees didn’t work due to approved leave from their total worked hours. For instance, sick days or vacation.
4. Add up all hours. Calculate the total hours worked by both full-time and part-time employees.
5. Calculate FTE for part-time employees. Divide the hours worked by part-time employees by the full-time hours your company uses. For example, if part-time employees work 20 hours per week and full-time is 40 hours, each part-time employee would equal 0.5 FTE.
6. Total FTE employees. To get your total number of FTE employees, add the FTEs of your part-time employees to the number of full-time employees.
| FTE Formula |
| FTE = (Total hours worked) / (full-time hours) |
You can repeat this calculation weekly, monthly, quarterly, or annually for more specific insights. Business managers, department heads, and HR teams can leverage the FTE system to determine the actual workload amount — and use that information for better financial planning, annual preparation, resource management, and scheduling.
Who is considered an FTE employee?
Not every employee is an FTE employee, since FTE status only includes employees who work hours contributing toward a 1.0 or 0.5 FTE measurement. A 1.0 FTE represents one full week of work, while a 0.5 FTE indicates half of that amount.
One whole FTE unit is 1.0, which can be made up of a single person or multiple employees. Let’s say a full-time measurement for your company is 40 hours per workweek. A single full-time employee could account for all 100% of this unit, or eight employees working five hours per week could. Similarly, a 0.5 unit can be made up by one part-time employee working 20 hours or by four employees working five hours each.
FTE Calculator Based on a 40-Hour Workweek
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FTE typically only applies to those working 120 days or more for your company, including temporary or leased workers. This does not include:
- Seasonal employees who work less than 120 days, such as employees a tax firm might hire during tax season or a retail store might hire during the holidays.
- Hours the company owner works, especially in small company contexts.
- Any hours a small company owner’s family members work, including in-laws.
Why is calculating FTE important for your company?
Calculating FTE offers several benefits for companies, such as optimizing workforce planning, ensuring accurate budgeting, and qualifying for tax credits. Companies can leverage FTE in various ways, including:
- Scheduling: FTE helps companies avoid under or overstaffing during slower or higher production periods by determining the necessary number of part-time workers needed for special projects. FTE also helps estimate the number of weeks a project will take to complete, based on the number of FTE employees assigned to it.
- Mandatory benefits: Knowing your FTE is critical for determining whether your company is responsible for offering certain benefits, such as affordable and minimum value group health insurance, as required by the Affordable Care Act (ACA). This requirement applies to employers with 50 or more employees. Part-time employees working 30 hours or less per week are excluded.
- Tax credits: Small businesses in the U.S. need their FTE to check eligibility for the Small Business Tax Credit, which helps businesses with 25 or fewer employees offset health insurance costs. Employers can use an online Full-Time Equivalent calculator to see if their company qualifies.
- Staffing insights: FTE calculations reveal how many part-time workers equal a full-time employee, helping assess individual employee effectiveness and decide who should be part-time or full-time.
- Federal program eligibility: In the U.S., FTE is required to determine eligibility for many federal programs, including the Paycheck Protection Program.
- Project timelines: FTE calculations assist in making decisions about staffing needs, restructuring, and managing projects.
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