What is a Full-time Equivalent (FTE) Employee?
FTE stands for a full-time equivalent employee and denotes the measure of a worker's workload concerning a standard full-time schedule, usually 40 hours a week. It enables organizations to combine full-time and part-time employees into one comparable unit. For example, two part-time employees working 20 hours each equal one FTE. This metric is very important for workforce planning, budgeting, and labor law observance.
How to Calculate Full-time Equivalent FTE Employees?
To calculate FTE, add the hours of all employees that work, whether full-time or part-time, for a given period and divide by standard hours for a full-time employee for the same period. For example, if total employee hours in a month are 3,200 and the standard full-time hours per month are 160, then the FTE calculation is 3,200 ÷ 160 = 20 FTEs. This helps determine staffing needs and eligibility for benefits.
Full-time Equivalent Employee Formula
The FTE formula is:
- FTE= Total Hours Worked by All Employees / Standard Full-Time Hours.
- For example, if employees collectively work 2,400 hours in a quarter and full-time hours for the quarter are 480 (40 hours/week × 12 weeks), FTE = 2,400 ÷ 480 = 5.
- This formula standardizes workload comparisons across different employee classifications.
Part-time Employee
A part-time employee works fewer hours than a full-time employee, usually less than 30-35 hours per week depending on the employer's policy. They are often paid on an hourly basis and may not be entitled to the same benefits as full-time employees. Example A part-time employee working 20 hours weekly contributes 0.5 FTE (20 ÷ 40). Part-time roles allow flexibility but demand cautious management when using FTEs.
Hours of FTE Work
FTE work hours are the typical number of hours a full-time employee would work, often considered 40 hours per week in many industries. Over the course of a year, this comes out to approximately 2,080 hours, factoring in 40 hours/week × 52 weeks. Organizations utilize FTE work hours to assess staffing levels, productivity, and compliance with labor laws.
FTE Standard Workweek
In many countries, the FTE standard workweek is 40 hours; again this is often an industry or company policy decision. Whatever number is used provides a benchmark against which an organization can fairly compare the workloads for full- and part-time employees. For instance, an employee who works 20 hours per week generates 0.5 FTE based on a 40-hour standard workweek.
Employee Headcount
Employee headcount is the total number of people employed by a company, full-time or part-time. As opposed to FTE, headcount counts an employee as one, regardless of hours worked. For example, a company that employs 5 full-time and 10 part-time workers would have a headcount of 15, which is different from the FTE count for the employees.
Overtime in FTE
Overtime in FTE counts those extra hours worked on top of a standard full-time schedule and adds them up in order to account for the overall workload. Assuming there is an employee who works 50 hours in a week, the extra 10 hours can add to the total hours worked (overtime), thus adding to FTE figures. This proper accounting for overtime allows for appropriate workforce capacity analysis.
Hourly Employee
Hourly employees receive wages depending on how many hours they put in, regardless of a fixed salary level. They often qualify for overtime when they work beyond the established workweek minimums. Consider an hourly worker who received $15 per hour and worked 30 hours in one week, totaling $450 in earnings. Hourly employees play an important role in industries that rely heavily on flexible or seasonal workforces.
Employment Classification
Employment classification further divides workers into full-time, part-time, temporary, or contract employees. These categories define eligibility for benefits, taxation, and expectations for hours worked. A full-time employee is described as one who works 40 hours weekly and includes benefits, while a part-time worker has limited hours and perks. The accuracy of proper classification has serious implications regarding compliance and organizational efficiency.