Full time equivalence (FTE) is a number that represents how much more, or less, a specific employee is working when compared to a standard full-time worker. There are some variances in the equation since certain companies define ’full time’ differently, but many industries use FTE hours.
There are several reasons FTE hours would need to be calculated. Often, it is used to predict seasonal staffing needs, or help make decisions to trim staff as necessary. It can also be used to help gauge other aspects of a company’s infrastructure in a very meticulous way.
The first step in calculating FTE hours for a business is to define what a full-time employee is. How many hours are worked by a full-time employee in your company? Most businesses see this as 40 hours. So: 40 hours a week, every week for 52 weeks would be the definition of hours worked by a full time employee - that is 2,080 hours yearly.
This number is used to compare with other employee hours. Note that these are measured in required hours, not actual hours worked. To get the FTE hours for an employee, divide that employee's total number of hours worked by the standard defined for full-time.
A full time employee has an FTE hours number of 1.0: 40 hours divided by 40 hours.
For example, in the above scenario, if we had a second employee who only worked 20 hours a week - 1040 hours a year - we would divide 1040 by 2080. This would give the result of 0.5. The second employee has 0.5 FTE hours, meaning half of a regular full-time employee.
You can add these numbers up for all employees to get the FTE hours for your business. If you are in a situation where you have a 40 hour work week and you have 5 full time employees at 40 hours each and 4 part time employees at 20 hours apiece, then your full-time employees equal 5 FTEs - that is, 5 x 1.0 - and your part time employees equal 2 FTEs (4 x 0.5); so you have a total of 7.0 FTE hours for your business.
This number can then be used to maintain a prime staffing level for your business. To illustrate: if one full time employee quits, you know that you need to fill 1.0 FTE hours. This means you can hire one forty-hour worker, two twenty-hour workers, or four ten-hour positions. The most difficult part of doing this is ensuring that the scheduling lines up properly.
There are many other uses for FTE hours. The total FTE hours could be used to see whether a staffing adjustment is needed. Comparing required FTE hours to FTE hours actually worked can show whether more or less people are needed.
Knowledge of how to calculate FTE hours can be a very valuable tool.