Calculating Full-Time Equivalent Employees (FTEs)
The calculation of full-time equivalent (FTE) is an employee's scheduled hours divided by the employer's hours for a full-time workweek. When an employer has a 40-hour workweek, employees who are scheduled to work 40 hours per week are 1.0 FTEs. Employees scheduled to work 20 hours per week are 0.5 FTEs.
An employer with a 35-hour workweek would simply divide the employee's scheduled hours by 35 to determine the FTE. For example, an employee scheduled to work 21 hours per week would be 0.6 FTE when the full-time workweek is 35 hours.
FTE calculations are about hours worked rather than number of employees. You could have four employees and only one FTE. Four 0.25 employees would be 1.0 FTE. Dave, Mark, Phyllis, and Sue could each work 10 hours per week and the total would be 40 hours worked or one FTE based on a 40-hour workweek.
Employers may use the FTE calculation for different purposes, such as benchmarking revenues or profits per employee. Converting hours worked by part-time employees into full-time equivalents can be helpful when calculating these metrics.
Some laws, such as The Patient Protection and Affordable Care Act (PPACA), specifically define how an FTE is calculated and require employers to count FTEs to determine how the law applies to their organization.