What is FTE?
What does FTE mean? An FTE is equal to the number of hours a full-time employee works for an organization. The concept is used to count “hours worked” rather than the number of employees to budget, forecast, staff and calculate wages. For example, if an organization considers 40 hours per week as full-time and there are four employees who work 10 hours each per week, the hours for those four employees add up together to make 1.0 FTE.
This standardization is very useful in employment classifications and other areas. For example, business analysts and project managers use FTE to evaluate workload and labor costs. Once they have an estimate of the full-time employees needed to accomplish necessary tasks, they can calculate salaries. This information allows them to forecast a budget for the upcoming year or for a specific project. For annual forecasts, FTE is sometimes referred to as the work-year equivalent, or WYE.
Human resources (HR) departments use FTE to standardize the working hours and salaries of part-time employees. For example, half-time workers are 0.5 because they work half the hours of full-time employees and they will receive 0.5 of a full-time salary.
FTE is also useful for headcount analysis. Budget analysts can easily compare headcounts to outputs or profits using FTE.
FTE is used to allocate employees to departments, depending on each department’s workload. Management and HR can evaluate projects, job descriptions or really any employment need and assess the number of FTE needed to get the job done.
How to calculate FTE
Follow these steps to calculate FTE for an annual count.
1. List your employees and hours worked
Prepare a list of all the employees paid with a year-end W-2 form. Exclude 1099 independent contractors. Deduct approved leave hours, such as paid time off and sick leave.
2. Determine the number of hours considered to be a full-time position
Companies usually define their full-time schedule by the maximum hours authorized, which is 40 hours per week. In this case, any employee working less than 40 hours per week would be considered to be a part-time employee. If a company defines a full-time position as being 30 hours, then any schedule under 30 weekly hours is considered to be part-time.
3. Calculate the hours worked per year
There are 52 weeks in a year. Multiply the number of weekly hours by 52.
4. Add up all full-time hours
Add up all the full-time hours worked by your full-time employees.
5. Add up all part-time hours
Add up all the part-time hours worked by your part-time employees.
6. Determine the part-time FTE
To determine the part-time FTE, divide the total hours worked by part-time employees by the annual hours worked by full-time employees (calculated in Step 3).
7. Calculate your total FTE
Add your part-time FTE to the full-time FTE. To calculate the FTE value for a specific position, simply divide the number of hours worked by the number of hours considered to be full-time. If you use 40 hours as full time, someone who works 35 hours has a 0.875 FTE. Someone who works 30 hours has a 0.75 FTE.
Example of full time equivalent calculation
To better understand FTE meaning and to understand how it works, here is a sample calculation.
1. List your employees and hours worked:
A company has a headcount of four. Two employees work 40 hours a week.One employee works 30 hours a week.One employee works 20 hours a week.
2. Determine the number of hours considered to be full time:
The company considers 40 hours per week as full time.
3. Calculate the hours worked per year:
40 hours per week employee:52 x 40 = 2,080 hours (1 FTE)
30 hour a week employee: 52 x 30 = 1,560 hours
20 hour a week employee: 52 x 20 = 1,040
4. Add up all full-time hours:
Two full time (40 hours per week) employees:2,080 x 2 = 4,160 hours
5. Add up all part-time hours:
1,560 + 1,040 = 2,600 hours
6. Determine the part-time FTE:
Divide the total hours worked by part-time employees by the yearly hours of 1 FTE (from step 3)
2,600 / 2,080 = 1.25 FTE
7. Calculate your total FTE
Add your full-time FTE to your part-time FTE.
Two full-time employees would be 2.0 FTE.
The part-time FTE is1.25
2.0 + 1.25 = 3.25 FTE
In our example, the headcount is four and the FTE is 3.25.
TheAffordable Care Act(ACA) requires that every employer with 50 or more FTEs must provide ACA-compliant benefits. To verify if your company is required to provide those benefits, you need to calculate your FTE count.
The ACA considers 30 hours per week or more as full time. You must follow this definition, even if your company policy defines full-time employment differently. Therefore, under ACA, any employee who works 30 or more hours equals 1 FTE.
Using the instructions provided above, if your calculation is 50 FTE or more, you are expected to provide appropriate medical coverage for your employees.
Full-time equivalent FAQs
Here are some answers to questions you might have about FTE:
What is 0.9 FTE?
A 0.9 FTE value represents the fraction of what a full-time employee would work.
If full time is 40 hours, then 0.9 FTE would be 36 hours.40 x 0.9 = 36
At another company, where a full-time position is 30 hours per week, 0.9 FTE would be 27 hours.30 x 0.9 = 27
What is the difference between FTE and headcount?
Headcount refers to the total number of employees working in a company, including both part-time and full-time employees. With headcount, each individual counts as “one,” regardless of the number of hours worked. The full-time equivalent or FTE definition refers to the number of hours considered full-time. For example, if a company considers 40 hours full time, and there are two employees working 20 hours per week, those two employees would be 1.0 FTE.
What does FTE 100% mean?
FTE 100% refers to a full-time employee or the equivalent of a full-time employee. In most companies, this means the employee works 40 hours, but some companies use other time amounts to describe full-time status. This can also be described as a 1.0 FTE value.
What does FTE mean in salary?
The FTE value comes into play with salary when an employee works a part-time vs. full-time schedule. The salary for the position is calculated for someone who works full time. The FTE helps determine the salary for a part-time employee. If the salary is $100,000 for a full-time employee, someone working in that role 20 hours per week, or a 0.5 FTE value, would make $50,000. Someone working 30 hours, or a 0.75 FTE value, would earn $75,000.
What FTE value is 30 hours?
If your company uses a standard 40-hour workweek, someone who works 30 hours has an FTE value of 0.75. This calculation comes from dividing 30 hours by 40 hours to get 0.75. If you use a different number of hours for full-time, divide 30 by that amount to get the FTE value.