Calculate FTE: Full-Time Equivalents Explained Simply

Given this increase in new working time models, however, it is becoming more difficult for businesses to keep an eye on their own personnel capacities. However, this uncertainty in personnel planning can be resolved by companies calculating their FTE. We explain what this is all about in this article. 

What is an FTE? – Definition of the Term

The abbreviation FTE stands for “full-time equivalent”. This key figure provides information on the total number of full-time working hours of employees. The FTE counts employees depending on their level of employment and helps to standardize the working hours performed or available in the company.

When calculating the FTE, the value 1.0 corresponds to the working time of a full-time employee (e.g. 40 hours). The value 0.5 corresponds to the working time of a part-time employee (e.g. 20 hours). This model can then be used to convert the working hours of part-time employees to full-time positions.

Calculating the Full-Time Equivalent (FTE) – Advantages for Companies

Although the full-time equivalent is only a mathematical figure, it has long been a fundamental indicator in personnel controlling and is one of the most important HR key figures for companies. Converting the hours worked by part-time employees into the working hours of theoretical full-time employees is worthwhile for companies for several reasons. 

Precise Staff Planning

The FTE calculation allows companies to precisely determine the required work capacity, which prevents over- or understaffing. This enables forward-looking workforce planning, especially for shift models and duty rosters, which is based on actual requirements and thus maximizes efficiency.

Efficient Budgeting

The calculation of the full-time equivalent provides exact data on the distribution of working hours, which enables a more precise calculation of staff costs. This helps companies to set up their own (salary) budgets precisely and thus make optimum use of financial resources. Furthermore, other staff expenses such as social benefits can also be calculated precisely.

Better Resource Allocation

By calculating the FTE for companies and departments, companies have a good overview of the available work capacity and can thus plan to ensure that the right capacity is assigned to the right departments or projects. This leads to optimal utilization of the available workforce and also increases productivity in the foreseeable future. 

Reliable Forecasts

The available FTE data already helps HR managers to plan employee requirements for the future development of the company. Hiring and layoffs can be planned as well as major business events such as expansion into new markets, outsourcing considerations or automation.

Accurate Reporting

Full-time equivalents provide precise key figures that are indispensable for internal and external reporting - for example in the course of audits or financial reports. Companies can create accurate reports on human resources that reflect actual labor capacity and distribution using a single metric. 

By calculating full-time equivalents, companies thus obtain a valuable database for numerous other analyses and evaluations. For example, the FTE data can also be used to calculate staff requirements. 

Full-Time Equivalent Formula

To calculate the full-time equivalent (FTE), the total number of hours worked by all employees in the company is divided by the number of hours defined as full-time in the respective company.

FTE = total number of hours worked by employees : calculation period

This simplified formula for calculating FTE gives the full-time equivalents for a single day. This calculation can now be extended to calculate the FTE for a week, a month or longer periods of time.

How Companies Calculate the Full-Time Equivalent – 3 Easy Steps

In the following calculation example, we determine the annual FTE for a company using exemplary figures. The calculation of the FTE is very simple. The basis for the calculation is 2080 working hours per year. 

This figure is calculated as follows:

• 8 (hours) x 5 (days) x 52 (weeks) = 2080 (FTE)

Of course, vacation and public holidays must also be taken into account here - so this is only a basis. With this basis, the FTE can easily be calculated in three steps:

1. Determining the Number of Hours Worked by Part-Time Employees

Our example company has a total of twelve employees. Four of them work in different part-time models.

Formula:

• 3 (employees) x 20 (hours) x 52 (weeks) = 3,120 hours
• 1 (employee) x 25 (hours) x 52 (weeks) = 1,300 hours
• Total: 3120 + 1300 = 4,420 part-time hours

2. Determining the Number of Hours Worked by Full-Time Employees

In our example company, eight specialists work in a full-time model.

Formula:

• 8 (employees) x 45 (hours) x 52 (weeks) = 18,720 hours
• Total: 18,720 full-time hours

3. Final Calculation of the FTE

Once these figures have been calculated, the part-time and full-time hours must be added together and then divided by the basic FTE figure. This results in the following calculation in our example:

Formula:

• 4,420 (part-time hours) + 18,720 (full-time hours) = 23,140
• 23,140 (total number of hours) : 2080 (FTE basis) = 11.125 FTE (annually)

This calculation results in a personnel capacity of 11.125 full-time equivalents per year for our example company. 

This example calculation was manageably complex - up to a certain company size, full-time equivalents in the company can be determined relatively easily with a calculator.

FTE vs. Headcount – the Differences 

Another HR key figure that is often used is the so-called headcount. However, this differs considerably from the full-time equivalents - and also serves completely different purposes.

Quantity before Quality

While the full-time equivalent helps HR managers to make the working hours of employees comparable, the headcount is a purely quantitative planning indicator for calculating personnel. As the name suggests, the headcount simply corresponds to the number of heads or employees in a company. These are added up and can then be analyzed by location or team, for example.

• FTE = workload and capacity
• Headcount = number of employees

Calculation and Counting

The exact determination of a company's full-time equivalents (FTEs) can - depending on its size and complexity - require comparatively extensive calculations. However, no formula is required to determine a company's headcount: Simply add up the individual employees / skilled workers. Calculating the headcount is therefore obsolete; a simple count of the workforce is sufficient.

• FTE = Requires recording of working hours
• Headcount = Simple counting of employees

Areas of Application of the Key Figures

The full-time equivalents of a company provide information about the available employee resources. This helps with both planning and budgeting and provides precise information on the actual work capacity within the company. The headcount, on the other hand, is useful for determining the number of all employees and their (cross-location) development - for example for organizational or legal reports.

• FTE = resource planning + budgeting
• Headcount = reporting + organizational structure

FTE vs. Headcount – an Application Example

Let's imagine a company that employs 10 people: 5 full-time employees and 5 part-time employees, each working 20 hours per week. The headcount of this company is 10, as it employs 10 people. 

The FTE, on the other hand, is only 7.5, as the part-time employees together represent only 2.5 FTE (5 x 0.5). In personnel planning, the headcount therefore indicates the total number of people, while the FTE provides a better overview of how much actual manpower is available to the company.

For all-round successful HR controlling, companies should always keep an eye on both key figures. This ensures that they have an appropriately large number of employees at all times and sufficient capacity to safely manage upcoming tasks and projects.

Calculating FTEs Correctly – Challenges in Implementation

When it comes to accurately calculating full-time equivalents within a department or company, there are a number of challenges that managers should be aware of. With our powerful workforce management software, we at GFOS also provide the right solution for all these scenarios.

Various Working Time Models 

Part-time models are becoming increasingly complex, flexible and therefore more complicated to calculate. With the help of appropriate software, however, the FTE can be determined automatically and according to clear specifications without any problems, so that even changing working time models do not lead to complications in recording. 

Inaccurate Data Recording 

Inaccuracies when recording working hours, overtime or absences can distort the FTE calculation. Manual entries in particular increase the risk of errors that lead to incorrect values. If complex working time regulations are used or the company's own workforce is very large, this problem becomes even more acute. With our software, however, you can easily automate all calculations. 

Need for Adjustment 

If the number of employees fluctuates frequently and significantly - for example, if there are many seasonal employees - the information on full-time equivalents must be continuously adjusted and updated in order to remain relevant for analyses. However, with an appropriate HR software solution that offers real-time updates and flexible adjustment options, this is not a problem. 

Complex Analyses 

In many cases, it is difficult to compare different FTE figures. This complicates their analysis and therefore also the decision-making process. But even in such cases, powerful HR software can help: integrated analysis tools can be used to generate detailed evaluations at the touch of a button, providing clarity on important key figures. 

HR Key Figures - a Reliable Overview with GFOS

In addition to the full-time equivalent, there are many other important key figures in the HR area and in personnel planning that can be used to better determine and plan your personnel requirements. We help you to make use of them.