A full-time equivalent (FTE) is a unit that indicates the workload of an employee in a way that makes workloads comparable across multiple contexts. One FTE unit equals the workload of a full-time employee. In other words, one FTE is equivalent to one employee working full-time.
FTE is calculated as the number of total hours worked during a period of time, divided by the maximum number of legally defined compensable hours in a full-time worker’s schedule.
For example, you have three employees and they work 50 hours, 40 hours, and 10 hours per week which adds up to 100 hours. Assuming a full-time employee works 40 hours per week, your full time equivalent calculation is 100 hours divided by 40 hours, or 2.5 FTE.
Uses for FTE
FTE is often used to calculate how many full-time equivalent employees an organization has for compliance with certain healthcare and employee benefit acts, to measure an employee’s involvement in a project or to track cost reductions in an organization.