FTE: What Is It and How To Measure It?

If you own or manage a business, then you are probably no stranger to the term FTE, or Full-Time Equivalent. It is a term used to measure an employee’s working hours in a certain timeframe, so that it is easier to calculate wages, benefits, and other related costs. FTE is less of a headcount, and instead shows the total hours of labor that have been provided. It measures the combined working habits of both part-time and full-time employees in a way that is uniform and easy to interpret.

In this article, you will learn about FTE and its importance in the workplace, as well as how to actually measure it. This guide will help you better understand FTE and how to use it to better gauge your wage and benefit costs, which can be an important task when it comes to balancing a budget and ensuring your business is running efficiently.

What is FTE?

FTE, or Full-Time Equivalent, is a term used to define the amount of labor an employee provides in a given period of time. It measures the total amount of hours worked by part-time and full-time employees together so that it can be standardized and analyzed. The FTE measurement is important for businesses for a variety of reasons, including helping to calculate the amount of wages and benefits that are paid out to workers, as well as helping determine return on investment and overall operational efficiency.

How to Measure FTE

Measuring FTE is relatively simple and straightforward. First, divide the total hours worked in a given period of time (typically an hour) by the number of hours an employee is supposed to work in that period, usually 40 hours a week for a full time employee. That will give you the number of FTEs for the day, week or month.

For example, if you had two full-time employees and two part-time employees, each of whom work 35 hours a week, you would calculate the FTEs in the following way:

Full-Time (2) x 40 hours = 80 hours a week

Part-Time (2) x 35 hours = 70 hours a week

Total Hours = 150 hours a week

The FTE would then be calculated as follows: 150 hours / 40 hours = 3.75 FTEs.

Conclusion

FTE is an important term to understand if you work in a business or if you manage a business. It is a measurement of labor that can help you better predict and manage your wage and benefit costs, as well as help with managing daily operations and return on investment. Taking the time to understand FTE and how to measure it is an important task when it comes to ensuring your business is running efficiently and staying within budget.