Full-time equivalency (FTE) represents an employee’s total hours worked divided by the number of compensable hours in a full-time schedule during a fiscal year. 

For example, if an employer’s workweek is set at 50 hours—or, five 10-hour days—and an employee works all 50 hours each week, their FTE would be 1.0.

Companies find FTE useful for a few main reasons, including: 

• Determining Employee Workload: The FTE proves a reliable indicator for how over- or underworked your team member is during a given period of time. If you have a worker who’s been hired to work for approximately 60 hours and they’re working 90-hour weeks, their FTE will be 1.5.
• Tracking Organization Costs: If your company bills clients, or pays out overtime, identifying teammates’ full-time equivalency helps identify and track organizational costs.
• Understanding Part-Time Contributions: If your team relies on part-time employees, understanding their contributions as a reflection of full-time equivalency helps you calculate valuable metrics, including the profits they generate.

To calculate full-time equivalents at your organization, you total the number of hours paid during a given period divided by the number of working hours in that period.

Here’s what the equation looks like: Hours paid in given period/working hours in that period = FTE.

So, let’s say that your organization runs on a typical 40-hour workweek. You have 4 employees. Jane works 40 hours a week, Brian works 30 hours a week, and Travis and Katie each work 15 hours a week. To calculate your number of FTEs you would:

Add the total number of hours worked/paid

40 + 30 + 15 + 15 = 100

Divide by the number of hours in the work period

100 / 40 = 2.5

In this example, your organization would have 2.5 FTEs.

Related Terms: Employee, Part-Time Employee