What Is a Full-Time Equivalent (FTE)?
In human resources, the terminology full-time equivalent (FTE) is used as a unit of measure showing how many employees an organization has or a project requires, assuming all employees work a full-time schedule.
FTE is a useful measurement because it helps budget analysts and project managers estimate labor costs. By understanding how many full-time workers a firm needs to accomplish certain tasks and the amount of their approximate salaries, budget analysts and project managers can better forecast the funds they will need to continue the company's work or a given project for the next year.
Using FTEs to Assign Departmental Employees
Organizations use FTEs to allocate employees across departments based on budget requirements or constraints. Management also drives allocations, based on the type and level of work required in each department. Management works with human resources to determine which positions should be full-time and which should be part-time, typically based upon job descriptions. Depending on the laws and policies the organization must follow, they may also gain a financial advantage by classifying positions one way or another.
One FTE usually, although not always, equals one job vacancy. Part-time employees sharing a job can equal one FTE, and some jobs do not require a "whole" FTE.
The Measurement in Use
- The Texas Legislature assigns each state agency an FTE cap for each fiscal year. If an agency has an FTE cap of 100, that agency can employ 100 full-time employees, or it can split some of the jobs into part-time positions. If the agency had 10 positions it could logically split among more than one part-time employee; the agency could have 20 people working 20 hours per week to fill those 10 FTEs.
- A project manager estimates that a major deliverable will take 50 hours to complete. This deliverable would take an FTE 1.2 weeks to finish. The project manager can assign work on this deliverable in a variety of ways. Assuming that employees assigned to the project can spend a maximum of 10 hours per week working on this project, the task would take one person five weeks to complete. If the work plan calls for the task to be completed in three weeks, the project manager could allocate two people to work on the task, each for 25 hours.
- A police chief notices that, over the past few months, the time it takes the crime lab to process evidence has increased dramatically. The chief has had an officer position vacant for a while, and it has not impacted how well the department serves the community. The chief decides to make that vacant position into an evidence technician position, so the chief moves one FTE from the patrol division to the crime lab.
Although FTE serves as a fixed unit of measurement, companies use a lot of flexibility in applying it to staffing issues while keeping within defined FTE salary or headcount limits.
When a company has mainly part-time employees, budget analysts convert their total hours worked into a FTE basis, to find the number of full-time staff to which they would equate. They can then use this FTE-converted data for several financial analytics, such as comparing headcount to profit, revenues, or per-store square footage. Converting staff to FTE also helps when comparing the company's headcount levels to other, similar firms within their industry, as a part of their overall industry analysis.