Full-Time Equivalent (FTE): Definition, Meaning, Calculation, Formula

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Project management can be a hassle when using both full-time and part-time employees. For that reason, companies may need to calculate the full-time equivalent. It is crucial in project management and federal programs. It allows companies to determine the number of full-time employees they employ. Before discussing how to calculate it, it is crucial to define it.

What is Full-Time Equivalent (FTE)?

Full-time equivalent is a unit to measure the total number of hours employees work. Based on that, it establishes how many full-time employees a company employs within a fiscal year. Similarly, it helps determine if the company needs to hire more employees for a specific project. It can be helpful in cases where companies employ both full-time and part-time employees.

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The full-time equivalent metric calculates the total number of full-time employees based on the hours worked. This metric does not consider the actual number of employees for that calculation. Even part-time employees contribute to the FTE based on the number of hours they work during a specific period. For that purpose, the average for part-time employees is considered.

Why do companies calculate Full-Time Equivalent (FTE)?

The primary purpose of the full-time equivalent metric is to help in project management. Project managers can use it to calculate various crucial elements in a project. For example, FTE can help them estimate the number of hours a project will take to complete. Similarly, it can help determine the number of full- and part-time employees the company must put on a specific project.

Similarly, companies must calculate this metric for various federal programs. Based on this calculation, companies can also calculate the accrual hours for paid time off for employees. In some cases, companies can also receive tax benefits associated with their employees. For that reason, calculating the full-time equivalent is crucial.

How to calculate Full-Time Equivalent (FTE)?

There are several steps to calculate the full-time equivalent. In most cases, companies must establish what “full-time” entails. Usually, the definition may vary from one area to another. Therefore, companies must start by defining what full-time is. Once they do so, they can calculate the number of full-time hours. In most cases, the typical hours worked by an employee is 8 hours. By that standard, the full-time hours in a week will be as below.

Full-time hours = 8 hours x 5 days a week

Once companies specify the full-time hours, they can use it to calculate the full-time equivalent. This process requires establishing the hours every employee is scheduled to work. Subsequently, companies must divide the actual scheduled hours by the number of full-time hours. Therefore, the full-time equivalent formula is as follows.

Full-time equivalent = Scheduled hours / Full-time hours

Companies can also expand the same formula when considering annual hours. Therefore, the formula for full-time equivalent will become.

Full-time equivalent = Total hours worked by all employees / Annual full-time hours for an employee

Companies may also need to calculate the full-time equivalent for a specific program. Some programs come with instructions on how to measure this metric. In those cases, companies must consider those criteria and calculate them accordingly.

Conclusion

Full-time equivalent is a metric to determine the total number of full-time hours completed by a full- or part-time employee. This metric can help companies in project management and federal programs, among other things. Usually, companies can calculate FTE with some straightforward steps. However, they must consider specific instructions provided by programs as well, if any.

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