What is full-time equivalent, and how to calculate FTE?

What is a full-time equivalent (FTE)?

Full-time equivalent (FTE) is the number of working hours spent by one full-time employee during a fixed period, which may be one week, one month, or, for example, one year. This method determines how many full-time employees are working in the company.

Calculating FTE simplifies the project schedule, as it helps to plan the number of people required to complete a particular task. It also impacts the calculation of labor costs and forecasts project budgets for the future. Based on the FTE calculations, managers can decide on the number of people required for a project in the future – let's say, whether it is reasonable to hire one more developer or not.

What is a full-time equivalent employee?

If you have both full-time and part-time employees in your company, you have to define how many FTEs you have in total.

A full-time equivalent employee (FTE employee) is a person working 40 hours per week, which equals 1 FTE. On a yearly basis, 1 FTE works 40 × 52 weeks = 2 080 hours per year.

At the same time, a part-time employee is a person who is working 20 hours per week, which equals 0,5 FTE. That means that 1 FTE is not necessarily a single employee, it may be a combination of several part-time employees: 2 part-time employees equal to 1 full-time equivalent employee (0,5 FTE + 0,5 FTE = 1 FTE).

If 4 employees work for 0,25 FTE, they total equal 1 FTE (0,25 × 4 = 1 FTE).

How does FTE impact employment within the company?

First, speaking about FTE and employment within any organization, FTE helps managers to plan the workload for any project – how many people are needed, which, at the same time, also means how many people it is reasonable to hire, the project timeline, etc.

The FTE also determines any business as an applicable large employer (ALE). A company can be considered as an applicable large employer if it has at least 50 FTEs (which does not necessarily mean that 50 people are working in this company, but the total number of hours spent by all the full-time and part-time employees equals 50 FTEs).

What is the FTE schedule, and how does it differ across the countries?

The FTE schedule has been changing throughout history. Let's say, in the 19th century people used to work much more than now, at least 60-70 hours per week (in comparison to 40 hours now).

Currently, 40 hours per week are considered a common norm for the FTE schedule. That means one employee works 5 days per week, 8 hours per day. However, in some countries or even companies, this number is different, depending on the legislation, company policy, etc.

For example, in the Netherlands, 1 FTE is around 29 hours on average, while in Colombia, it stands for 47 working hours. But, 1 FTE = 1 FTE in calculations in both cases.

That means that before calculating a company's FTE, a manager shall consider, first of all, company and country distinctions and regulations. And this also means that 1 FTE may equal a different number of working hours in different countries or even companies.

How to calculate FTE. Step-by-step guide

Calculating FTE is quite a time-consuming process, especially if many employees work in a company, if a company hires many employees within the year, and if part-time employees' workload is flexible (let's say, if one part-time employee has been working 20 hours during week 1, 25 hours during week 2, 28 hours during week 3, etc.).

Many details should be considered while calculating FTE. Let's consider the whole process and those important details.

Create a list of the company's employees and the number of hours spent by each of them

Calculating FTE is based on the payroll reports. That's why the first step in FTE calculations is to get the payroll report and create a separate table containing 2 columns – a person's name and the number of hours spent by this person during the week. It may look in the following way:

Trello Kanban board visualization

Do not forget that when a person is a full-time employee, the number of hours spent by him/her is usually the same every week and equals 40 hours (it may be more or less, depending on the company policy – how many working hours are considered as full-time employment for every employee). But when you have a part-time employee, the number of hours may differ across the weeks. For example, one employee may spend: week 1–20 hours, week 2–25 hours, week 3–23 hours, etc.

Determine 1 FTE in your company

As we have already described above, 1 FTE may equal a different number of hours in various companies. You may have 1 FTE = 40 working hours or 1 FTE = 35 working hours, depending on the company's or country's policy.

Let's say you determine that 1 FTE equals 40 hours of work per week. Then you should define which employees are working full-time and which are part-time.

Calculate the number of hours employees have worked per month

First, let's add up the hours spent by all full-time employees. The table above shows that we have 3 full-time employees, who spent 3×40 = 120 hours per working week.

Then you need to add all hours spent by part-time employees: 120 + 30 + 25 + 25= 200 hours in total.

This means that all company employees (both full-time and part-time) spent 200 working hours together.

Separate hours of part-time employees

From the table above, we have 2 part-time employees in the company. Let’s calculate their working hours separately, which equals 30 + 25 + 25 = 80 hours.

As we determined in step 2, 1 FTE = 40, we have 2 FTEs from our part-time employees:

80 40
= 2 FTEs

This means that the number of working hours of the company's 3 part-time employees equals the number of working hours of 2 FTEs.

Add up your results

At this step, you determine the total FTE in your company. That means you have to add up the number of FTEs of your full-time employees (calculated in step 3 above) and the number of FTEs of your part-time employees (calculated in step 4 above).

3 FTEs + 2 FTEs = 5 FTEs

Such calculations have to be made every week throughout the year. If the employees work the same number of hours every week (especially part-time employees), the FTE will be the same every week. But if the number of working hours is a variable component, if you hire new people to your company, the calculations will be more complex, and the total FTE will vary from week to week.

You can take the average number of hours spent by part-time employees per week and not make separate calculations every week. Still, in this case, it's more reasonable to take some bigger periods, let's say, 90-day or 120-day periods, during which you can take the average number of hours spent by part-time employees.

How to calculate FTE for individual employees with examples

First, we need to define the 1 FTE within the company, and how many working hours shall be considered as full-time employment. Let's say 1 FTE = 40 working hours.

Then we shall take the number of hours a particular employee spends within the working week (from the payroll report).

Example 1. If an employee has spent 40 hours per week, he has 1 FTE (because we have previously defined that 1 FTE = 40 working hours).

Example 2. If an employee has spent 30 hours per working week, to calculate his FTE, we shall divide the actual number of hours spent by the general equivalent:

30 40
= 0,75 FTE.

Example 3. If an employee has spent 20 working hours per week, his FTE is

20 40
= 0,5 FTE.

How to calculate FTE for all employees with examples

To calculate FTE for all employees in the company, you have to consider both full-time and part-time employees. The first step is, again, to determine 1 FTE which is applicable for our company. Let's take that 1 FTE = 40 working hours.

1 FTE = 100 % FTE = 40

Example 1. If you have 5 full-time employees, you have 5 * 1 FTE = 5 FTEs

Example 2. If you have 2 part-time employees, each of them working for 20 hours per week (20 / 40 = 0,5 FTE), the calculations are the following: 0,5 FTE + 0,5 FTE = 1 FTE. This means that 2 part-time employees are equal to 1 full-time employee in the company.

Example 3. The more complex calculations are applicable when your part-time employees do not work exactly half of the usual number of working hours (in our example, 40 / 2 = 20) if their working schedule is flexible.

If you have 3 employees with several working hours equal 30, 35, and 23, the most straightforward way to calculate their FTE is, firstly, to add up their number of hours: 30 + 35 + 23 = 88 hours.

Then you should divide the result to 1 FTE: 88 / 40 = 2,2 FTE. Finally, you have to round this down to the next big number, which is, in our case, 2 FTEs.

How to convert FTE to hours?

We have already determined how to convert employees' working hours to FTE, but we can also do another process – convert FTE to the working hours.

If we determine that for our company, 1 FTE equals 40 working hours, that means that 1 FTE = 40. So if we have 5 FTEs, it equals

5 x 40 = 200 working hours

this is the number of working hours spent by 5 full-time employees per working week.

If we have 0,5 FTE, it equals to

0,5 x 40 = 20 working hours

If we have 0,7 FTE, it equals to

0,7 x 40 = 28 working hours

If we have 4,5 FTE, it equals to

4,5 x 40 = 180 working hours

How to convert FTE to the employee's working hours? To convert the number of hours an employee is expected to work based on his/her FTE, we shall reverse the previously discussed process.

For example, we have 1 employee with 0,6 FTE in a company. 1 FTE in this company is 40 working hours. We need to calculate the number of hours this employee works during the year.

First, we need to determine the number of hours a full-time employee will spend during the year. If the year has 52 weeks and 1 FTE = 40 working hours, a full-time employee will work 52 × 40 = 2 080 hours per year.

If an employee has 0,6 FTE in the company, he works 0,6 × 2 080 = 1 248 hours per year.

This is not the actual number of hours spent, just an expected number. The actual number of hours may differ for every part-time employee. For a full-time one, the exact number of hours equals the expected number of hours in most cases.

What is 100 % FTE?

100% FTE equals 1 FTE or 1.0 FTE. This means that 1 person is working full-time or several employees together work the number of hours determined for 1 full-time employee in the company.

If one company has defined that a full-time working week is 40 hours (1 FTE = 40), and another company has defined a full-time working week at the level of 30 working hours (1 FTE = 30), both count to 100% or 1.0 FTE. you can have the following employees in the company as well

50 % or 0,5 FTE
70 % or 0,7 FTE
90 % or 0,9 FTE

Or any other FTE equivalence less than 100% FTE or 1.0 FTE.

What is 75% FTE?

75% or 0,75 FTE is a company employee who has been working regularly 75% out of the defined number of hours for a full-time employee. That means that if the company regulations define that 1 FTE equals to 40 working hours, this employee shall work 0,75 × 40 = 30 hours per week to be considered as 75% FTE.

If the company has defined that 100% FTE = 35 hours, 75% FTE = 0,75 × 35 = 26 working hours.

Some companies may consider 75% FTE employees as full-time employees. It absolutely depends on the company policy.

How to calculate an FTE salary?

The FTE salary is an employee's salary converted into a full-time equivalent wage within the year. The actual number of working hours spent by an employee is not considered in these calculations. This means that the salary of an employee working full-time and expected to work full-time will be the same, even if the actual number of hours spent in a particular week is less than the required for full-time employment.

If, for example, an employee has been working 9 months with FTE = 50% and got a salary at the level of 20,000 USD, the FTE salary calculation is:

9 12
= 0,75 years
50 % FTE = 0,5 FTE
20,000 ( 0,75 x 0,5)
=
20,000 0,375
=
53,333 USD per year

This means that this company's

1 FTE salary = 53,333 USD per year

What does FTE mean in business?

You should calculate FTE because of several factors:

  1. To define the FTE salary
  2. To calculate the required headcount for the project.
  3. To plan the workload and determine the necessity to hire more employees.
  4. To budget current and future workforce needed.
  5. To select the company's business size.
  6. To define whether you are an applicable large employer (ALE).
  7. To limit company eligibility for certain programs.

How to calculate the required headcount?

Let's imagine that the expected project duration is 1280 hours, while the 1 FTE in our case is 40 working hours. Therefore, every team member can spend 8 working hours per day on this project.

Formula:
Estimated Project hours / ( FTE (hours) * FTE employees)

Example 1.
Full-time employees – 4 (4.0 FTE)
4.0 FTE – 32 hours/day
1280 / 32 = 40 days (Project length)

Example 2.
Full-time employees – 10 (10.0 FTE)
10.0 FTE – 80 hours/day
1280 / 80 = 16 days (Project length)

Example 3.
Full-time employees – 4 (4.0 FTE)
Part-time employees – 8 (4.0 FTE)
8.0 FTE – 64 hours/day
1280 / 64 = 20 days (Project length)

What is FTE in project management?

Completing a project is not only doing the project within a calculated budget and timeline. It's also to assign the best people for a project. This requires a lot of planning and preparation work, and here is where project managers shall calculate FTE and use this data.

FTE calculations make project planning easier and more accurate because project managers know the actual capacity their team has, and the capacity required for a particular project. If a project manager has several projects at the same time plus several projects planned for the future, it becomes impossible to plan resources accurately without calculating FTEs.

Full-time employee calculating software as the best decision

As we already mentioned, in the article above, manual calculating of FTE is a complicated and time-consuming process, especially if there are many employees in a company if the company hires many people during the year, and if the part-time employees are flexible in terms of actual hours spent every working week (there is no fixed required number of hours for a part-time employee).

In this case, calculating FTE every week, month, or year will not be so easy. Here is where Wobbly comes! Wobbly offers the most affordable and accessible approach to time tracking. It's a multipurpose tracking tool, the most important features of which are:

  • time tracking;
  • reporting;
  • invoicing;
  • team management;
  • resource planning.

Wobbly will help every project manager not only to calculate FTE easily but to plan resources, make weekly/monthly reports, send invoices for clients, etc. It makes the life of every project manager easier by avoiding tons of manual work. Sign up to Wobbly, the time tracking software, for free, and you will test all the benefits of our tool.