full time equivalent fte

What Is Full Time Equivalent (FTE)?

Full time equivalent (FTE), also called time-equivalent employees, is a measurement of employee workload. FTE calculations consider the total hours worked by part-time employees and factor their impact on the overall workload. Typically, human resource departments use FTE for budgeting, benefits reporting, and tax withholding. The calculation helps you understand how long an employee works per week or month. It’s used to determine whether benefits apply based on a specific employee’s work schedule. This post will give you a brief overview of what FTE is and how it’s used in HR departments.

What Is Full Time Equivalent (FTE) and Why Is It Used?

Full time equivalent employees (FTEs) measure the workload of part-time employees in terms of what a full-time employee would do. Many companies use FTE to determine employee benefits, tax withholding, and budgeting. FTE is often used for employees who work fewer than the standard 40 hours per week. It allows you to see the impact of part-time employees on the full-time equivalents of the company as a whole. FTE is also necessary for hiring managers, who can use it to gauge the impact of hiring a part-time employee. If you hire full-time employees and part-time employees, it’s essential to understand how they’ll fit together and the effect on the overall workload.

FTE Calculation and Example

FTE is measured by the number of hours worked by a part-time employee in one week compared to the number of hours worked by a full-time employee. To calculate the FTE, add the total hours worked for each part-time employee and divide by 40. 

FTE is calculated as follows: 

Employee A: 10 hours worked per week 

Employee B: 15 hours worked per week 

Total hours worked for the week: 25 FTE calculation: 

25 hours worked per week / 40 hours per week = 62.5% 

The above calculation shows that the two employees worked 62.5% of the hours of a full-time employee. This means that if you’re calculating benefits and taking taxes into account, you can consider them as working 62.5% of the hours of a full-time employee.

How is an FTE employee different from a regular employee?

Unlike a traditional employee whose hours are tracked and reported as one lump sum, FTE employees have their hours tracked and reported individually. This means you can be more specific about who is working and when. This specificity is helpful for managers who have employees who work irregular hours. This includes employees with variable schedules, part-time employees, and remote workers. FTE also helps you see how employee absences will impact the overall workload. If you have an absent employee for a few days, you can see how their absence affects the workload.

How to Calculate an FTE Employee

An FTE employee is someone whose hours are measured in proportion to the hours of a full-time employee. The two most common ways to measure part-time employees are by week or month. 

By week: The most straightforward way to measure an FTE is by the week. Add up all the hours part-time employees work in one week and divide by 40. 

By month: Some companies prefer to measure part-time employees by the month. This is a little more involved since you must consider vacation time and work extra hours. 

Add up the hours worked for each employee in one month. 

Divide the total hours for each employee by the total number of hours in a month (8 hours per day x 30 days = 240 hours per month). 

If a part-time employee takes a vacation, add the hours of vacation time to their total hours worked for the month. 

When you have all the numbers, divide each employee’s hours by the total hours per month. 

Add up the resulting numbers to get the FTE for each employee.

Limitations of using FTE as a measurement of workload

FTE is a valuable tool when determining employee benefits and calculating taxes, but it doesn’t capture the amount of work a part-time employee does. 

It doesn’t consider the quality of work. Some part-time employees might be incredibly productive in their limited hours, while others might be dragging their feet. 

It doesn’t account for the type of work that a part-time employee is doing. Some jobs naturally take more time than others. 

It doesn’t consider the situations where part-time employees take on extra work.

Bottom line

Full time equivalent employees are a useful measurement for determining benefits and taxes for part-time employees. However, it’s important to understand that FTE doesn’t capture the actual amount of work that a part-time employee does. If you’re hiring part-time employees or working with employees with varying hours, it’s important to understand how it will impact the workload. FTE helps measure workload and track time, but it doesn’t show an accurate picture.

Basil Abbas

Basil is the Founder and CTO at ClockIt. With over 10 years of experience in the products space, there is no challenge that is too big in front of him be it sales, marketing, coding, etc. A people person and loves working in a startup for perfection.