Are you aware of your company’s productive potential? Do you understand what the term «full-time equivalent» (FTE) means and how it can give you a clearer picture of your organization’s needs?
The acronym FTE, which comes from the English term «Full-Time Equivalent”«, are a crucial indicator for companies, as they reflect the equivalent working hours per employee.
FTE is a valuable tool for making strategic decisions. For example, by calculating the full-time equivalent, you can determine whether your company needs to restructure, hire, or downsize. Let me explain this concept in more detail so you can make the most of this tool in managing your organization.
Exactly, what is FTE?
«Full-Time Equivalent»—this acronym is not only well-known, but also is a valuable resource for Human Resources departments by evaluating each employee's performance based on the hours spent working. It is a key indicator that sheds light on the productivity of each team member.
The concept of full-time equivalent brings about a significant transformation by converting the hours worked by part-time employees into an equivalent that can be directly compared to the hours worked by full-time employees.
This conversion offers a more equitable perspective and provides a clear picture of each staff member's contribution, thereby facilitating a more accurate and fair evaluation.
The Usefulness of FTE in a Company
This tool is clearly useful at the corporate level, as it reveals the workforce available within the company. This facilitates the accurate calculation of performance—not only for a specific team or department, but even for the entire organization.
This method serves as an essential tool for accurately measuring the number of employees in a company, taking into account both its size and the workforce planning phase. FTE is a highly valuable metric for companies that employ professionals with varying work schedules.
Its main application is to measure stress, whether already implemented or planned, before undertaking an activity or project, expressed in terms of full-time equivalents. In this way, FTE serves as a key ally in the efficient management of resources and in the company’s strategic planning.
How is the FTE calculated?
This metric, also known as the full-time equivalent, provides a comprehensive view of the workforce, regardless of the different types of contracts employees may have. This ranges from full-time employees to those who work part-time, and even those who work only one day a week.
As mentioned earlier, the term FTE is widely used to quantify resources in various contexts:
Resources for Activities and Projects
FTE is used to calculate the resources needed to perform a specific activity or carry out a project. One FTE is essentially equivalent to one workday. For example, 10 FTE may represent the commitment of a resource for 10 business days or the allocation of two resources for 5 business days.
Staff of a Department or Company
If we consider the year or the person as a unit, this FTE could represent a resource that is available full-time for one work year. This is calculated, on average, as 220 workdays. (365 days, excluding Saturdays, Sundays, and holidays), for a total of 1,760 working hours.
Any employee with a different schedule is adjusted to this figure. For example, someone with a part-time contract of 6 hours would be equivalent to 0.75 FTE (6/8 hours), while someone who works 4 hours would be 0.5 FTE.
This metric is crucial for measuring the workload of a full-time employee. It represents the total number of hours worked by all staff over the course of a year, including both part-time and full-time employees. The calculation is performed by dividing this total by the number of hours worked by a full-time employee.
How is FTE Calculated?
Full-time equivalent is determined by applying the following simple formula:
FTE = Number of full-time hours + (Number of part-time hours / Time period to be calculated). Where the time period to be calculated can be:
- 2,080 for annual FTE
- 173.33 per monthly FTE
- 8 for daily FTE
With this formula in mind and the time period defined, the steps for the calculation are as follows:
Calculate the hours worked by part-time employees during a given period
- Review the accounting records to identify the hours worked by part-time staff.
- Multiply the total number of hours per week by the number of weeks worked by each part-time employee.
Example:
- If a part-time employee worked 20 hours a week for 30 weeks: 1 × 20 × 30 = 600; 1 × 20 × 30 = 600 hours.
- If two part-time employees each worked 15 hours a week for 30 weeks: 2 × 15 × 30 = 900; 2 × 15 × 30 = 900 hours.
- Add the results to get the total number of part-time hours (in this example: 600 + 900 = 1,500; 600 + 900 = 1,500 hours).
Calculate the hours worked by full-time employees during a given period:
- Establish that a full-time employee works a maximum of 40 hours per week (or as stipulated in the national collective bargaining agreement for that category).
- Multiply the number of full-time employees by 40 hours (equivalent to their weekly work schedule of 8 hours a day, 5 days a week).
Example:
- If there are 5 full-time employees: 5 × 40 = 2005 × 40 = 200 hours per week.
- Multiply this result by the 52 weeks in a year (200 × 52 = 10,400; 200 × 52 = 10,400 full-time hours).
By following these steps, you will obtain the final FTE, providing an accurate and understandable measure of the workload in full-time equivalents, taking into account both part-time and full-time employees.
This approach facilitates a more detailed and effective assessment of the human resources available within the organization.
