What Is FTE (Full-Time Equivalent)?

Full-time equivalent (FTE) is a measurement employers use to standardize their headcount. It combines their part-time workers’ hours to figure out how many full-time employees it would take to work those hours. Making strategic decisions based on FTE counts instead of actual employee headcounts allows companies to simplify the payroll complexities of a multi-status workforce (full-time, part-time, and contract workers) and make more accurate budgeting forecasts.

Knowing your FTE number is also helpful for determining if your organization is eligible for certain benefits programs, such as the Small Business Health Options Program (SHOP).

How Is FTE Calculated?

Organizations can convert part-time and contract employee hours into FTE unit employees by following these six steps:

1. Make a list of all your employees and their scheduled weekly hours. For this calculation, only count hours worked for those receiving a W-2 and exclude all 1099 contractors.
2. Determine how many hours your company considers to be full-time. This is usually between 30-40 hours. Anyone who falls below your full-time threshold is a part-time employee.
3. Calculate the annual hours worked for all employees. Multiply 52 (the number of weeks in a year) by the number of hours each employee from your list works per week .
4. Figure out the total hours per year for each employee type. In other words, add up the annual hours for all full-time employees and the annual hours for all part-time employees separately.
5. Determine the part-time FTE. Divide the total hours worked for all part-time employees by the annual hours worked for just one of the full-time employees at your company.
6. Determine the total FTE. Add the number of full-time FTEs (one for each full-time employee) to the part-time FTE from the previous step.

Please note: Each company must determine for itself how many hours is full-time, so adjust your FTE calculation accordingly.

FTE Calculation Example

Here’s an example calculation you can use for your company:

Step 1. Identify Your Employees and Their Hours

Suppose your company has a mixture of full-time and part-time employees who work different hours:

• Two full-time employees working 40 hours per week (Employees A and B)
• One part-time employee working 30 hours per week (Employee C)
• One part-time employee working 20 hours per week (Employee D)
• One part-time employee working 10 hours per week (Employee E)

Step 2. Define What "Full-Time" Means for Your Company

Your company defines a full-time position as 40 hours per week. Anything less will be considered part-time.

Step 3. Calculate Annual Hours Worked

Multiply each employee's weekly hours by 52 to figure out how much they work in a year:

• 2,080 hours for Employee A
• 2,080 hours for Employees B
• 1,560 hours for Employee C
• 1,040 hours for Employee D
• 520 hours for Employee E

Step 4. Add Annual Hours for Full- and Part-Time Employees

The annual hours for your full-time employees (A and B) add up to 4,160 (2,080 x 2).

The annual hours for your part-time employees (C, D, and E) add up to 3,120 (1,560 + 1,040 + 520).

Step 5. Calculate Part-Time FTE

Divide annual part-time hours (3,120) by the annual hours for one full-time employee (2,080):

3,120 / 2,080 = A part-time FTE of 1.5

Step 6. Calculate the Total FTE

Add the full-time FTE (in this case, it’s 2.0 since there are two full-time employees) to the part-time FTE from the previous step (1.5).

2.0 + 1.5 = a total FTE of 3.5

This calculation provides a convenient way to quantify how many theoretically “whole” full-time employees are on the company payroll per year, even if the majority of your workforce is actually part-time.

How Is FTE Used in Business?

Converting the hours worked by a multi-status workforce into FTE employees makes it easier for an organization to analyze performance, both internally and compared to competitors. Companies also use FTE to help with many other business processes, including:

• Budgeting: Estimating labor costs for a new project or initiative
• Hiring: Determining how many full- or part-time employees you can hire in a fiscal year
• Workforce management: Knowing whether you should hire one full-time or multiple part-time employees and figuring out how many hours part-time employees should work
• Forecasting: Calculating the average profit per employee you can expect for the upcoming year

For example, comparing the two groups over time allows an organization to find opportunities to improve efficiency when hiring seasonally or when making part-time and full-time staffing decisions. After all, the net costs of hiring additional part-time employees may, in fact, be lower than the more visible cost of overtime pay for existing staff, and FTE is used to uncover such findings.

Additionally, you can use FTE to determine pay for part-time workers by simply multiplying a part-time employee’s FTE by the full-time salary for that same position. For example, if a full-time program coordinator makes $60,000 per year for 40 hours a week, a part-time employee working 25 hours per week in the same position (0.625 FTE) would make $37,500 per year.

When using FTE alongside other performance metrics, it can be easier to understand per-employee costs and output in a large organization.

What Is Considered Full-Time?

The Fair Labor Standards Act (FLSA) doesn't define what full-time or part-time employment is for any employer. To fulfill an employer’s shared responsibility to provide access to employee health coverage under the Affordable Care Act, a full-time employee provides at least 30 hours of service per week (or 130 hours per month).

Most US companies adhere to the standard 40-hour, five-day workweek. However, many employers have experimented with a 4-day workweek in recent years.

What Does FTE 100% Mean?

FTE 100% is the same as FTE 1.0. It represents a single full-time employee or multiple part-time employees whose hours add up to one full-time employee’s hours.

How Do You Convert FTE to Hours?

To convert an employee’s full-time equivalency into standard hours, multiply their FTE rate by 40. For example, if an employee has an FTE of 0.80, multiplying that number by 40 means that an employee works 32 hours a week.

What Is FTE Salary?

HR departments often use FTE salaries to determine their part-time workers’ compensation. A part-time employee’s FTE salary is calculated by multiplying their FTE value by the salary allotted to an equivalent full-time employee. For instance, let’s say a full-time graphic designer working 40 hours per week makes $48,000 per year. A part-time graphic designer working 30 hours per week at that same company would have an FTE of 0.75 since they work 75% of that 40 hours.

To get their FTE salary, you would multiply 0.75 x $48,000. This means the part-time graphic designer would earn $36,000 per year.

What Is the Difference Between FTE and Headcount?

Headcount refers to how many people your company employs. Calculating headcount is as simple as adding up the number of people on your payroll, while FTE refers to the number of full-time hours being worked at the company.

Let’s say you have 100 employees, but 18 of those employees are part-time and only work 10 hours a week. Altogether, those 18 employees only account for the hours of 4.5 full-time employees. Therefore, your company’s FTE would be 86. (82 full-time employees + 4.5 part-time employee FTE).

ACA Compliance and FTE

The Affordable Care Act requires employers with 50 or more FTEs to offer healthcare benefits that line up with ACA standards. Keep in mind that the ACA defines employees who work 30 hours per week (or 130 hours per month) as FTE, meaning employers who normally define full-time as 40 hours per week need to consider anyone working 30+ hours as 1.0 FTE in this context.