An FTE is the hours worked by one employee on a full-time basis. The concept is used to convert the hours worked by several part-time employees into the hours worked by full-time employees. On an annual basis, an FTE is considered to be 2,080 hours, which is calculated as:
8 hours per day
x 5 work days per week
x 52 weeks per year
= 2,080 hours per year
When a business employs a significant number of part-time staff, it can be useful to convert their hours worked into full time equivalents, to see how many full-time staff they equate to. The FTE concept is used in a number of measurements that compare headcount to revenues, profits, or square footage. The concept is also useful for comparing headcount levels among the firms within an industry, as part of an industry analysis.
Here are several examples of how the FTE concept is calculated:
There are 168 working hours in January, and the ABC Company staff works 7,056 hours during the month. When 168 hours are divided into 7,056 hours, the result is 42 FTEs.
There are 8 working hours in the day on Monday, and the DEF Company staff works 136 hours during that day. When 8 working hours are divided into 136 hours, the result is 17 FTEs.
There are 2,080 working hours in the year, and the GHI Company staff works 22,880 hours during that year. When 2,080 working hours are divided into 22,880 hours, the result is 11 FTEs.
The 2,080 figure can be called into question, since it does not include any deductions for holidays, vacation time, sick time, and so forth. Alternative measures of FTE that incorporate these additional assumptions can place the number of hours for one FTE as low as 1,680 hours per year. The exact number will depend on the country where the employment is occurring, since the number of holidays varies by country.
If a business intends to use 2,080 hours rather than some lower figure as the basis for its FTE calculations, this is considered a theoretical standard; that is, an amount that can only theoretically be met by someone who works through all holidays, takes no sick time, and does not take any vacation time.
An FTE is also known as a full time equivalent.