FTE calculator: How to calculate full-time equivalent employees

Understanding full-time equivalent (FTE) employees

A full-time equivalent (FTE) is a unit of measurement that standardizes the number of hours worked by full-time and part-time employees. It helps you calculate your workforce capacity and understand labor costs across your organization.

If your full-time employees work 40 hours per week for 52 weeks per year, you would use 2,080 hours to represent 1 FTE. An employee working 20 hours per week would equal 0.5 FTE. This definition of full-time work serves as the standard full-time schedule for most FTE calculations.

Understanding your FTE count is essential for budgeting, workforce planning, and compliance with regulations like the Affordable Care Act. Business owners use FTE to determine the full-time equivalent workforce needed to meet operational demands.

FTE calculation formula: How to calculate FTE

To calculate FTE for your organization, use this formula:

FTE = Total number of hours worked by all employees ÷ Full-time hours in a period

Here's a step-by-step FTE calculation:

• Add up the total full-time working hours for all full-time employees
• Add up the total part-time working hours
• Combine both totals to get total working hours
• Divide by the number of full-time hours in your chosen period (2,080 for annual FTE)

Example: Your company has 10 full-time employees working 40 hours a week and 10 part-time employees working 20 hours per week. Your weekly FTE calculation would be:

(10 x 40) + (10 x 20) = 600 total weekly hours worked

600 ÷ 40 = 15 FTES

This free FTE calculator helps you estimate the number of full-time equivalent employees on your team by taking work hours and dividing by standard working hours per full-time employee.

Why you need to calculate FTE for your business

FTE calculations help business owners and finance leaders make informed decisions about workforce capacity and labor costs. Here's why calculating FTE matters:

• Budgeting accuracy: Estimate the number of full-time employees needed to complete projects and allocate resources appropriately
• Labor cost visibility: Calculate labor costs consistently across teams with varying work schedules and weekly hours
• Compliance: Determine eligibility for programs like PPP loan forgiveness and ACA requirements
• Workforce planning: Identify hiring needs by comparing current FTE capacity to workload demands

According to the Bureau of Labor Statistics, understanding workforce metrics is critical for strategic planning. Without accurate FTE data, finance leaders often rely on estimates that can lead to budget overruns. Use FTE to get a clear picture of how many full-time equivalent employees are on your team.

How to calculate employee costs using FTE hours

Understanding how much your employees actually cost—for both full-time and part-time employees—provides important insights into your business. Are you billing clients enough? Which employees and roles help increase profitability?

To calculate employee costs:

1. Multiply the employee's hourly wage by the number of hours worked that year
2. Add another 25% to cover payroll taxes, benefits, and overhead expenses
3. Add the cost of any bonuses

For example, a full-time employee works 2,080 hours at $30/hour:

• Base salary: $62,400
• Plus 25% overhead: $15,600
• Total employee cost: $78,000

This FTE-based approach helps you calculate labor costs accurately and compare expenses across departments with different staffing mixes. When employees who work part-time schedules (such as 3 days per week or average weekly hours of 20) are converted to FTEs, you can fairly compare productivity.

FTE vs. headcount: How to calculate the difference

Headcount counts the total number of employees on your payroll, regardless of hours worked. FTE standardizes this by converting part-time hours into full-time equivalents based on working hours in a week.

Example: A company with 5 full-time employees and a number of part-time employees (20 workers at 20 hours) has:

• Headcount: 25 employees
• FTE: 5 + (20 × 0.5) = 15 FTEs

FTE gives you a more accurate picture of your workforce capacity and helps you estimate staffing needs. When comparing productivity or revenue per FTE, use FTE to determine how many full-time equivalent employees you actually have for fair comparisons. The total number provides context, but the number of FTEs tells you actual capacity.

How time tracking helps with FTE calculations

Time tracking software automatically calculates work hours and employee costs for your entire organization. Instead of relying on estimates or manual calculations, you get accurate data on hours worked by all employees.

This FTE calculator helps you get a clear picture of your workforce, but ongoing labor cost management requires consistent tracking. When you need to calculate FTE regularly, time tracking tools help you:

• Monitor actual hours worked vs. scheduled full-time hours
• Track vacation time and holiday hours accurately over 120 days or more
• Generate finance-ready reports for payroll and budgeting
• Maintain audit-ready records of employee working hours
• Calculate how many full-time equivalent employees you need for projects

Affordable Care Act: FTE and employee benefits compliance

The Affordable Care Act defines full-time employment as 30 hours or more per week (sometimes described as 30 hours a week). Organizations with 50+ FTEs must offer health insurance to full-time employees or face penalties.

To calculate FTE for ACA compliance:

1. Count all full-time employees (those working 30+ hours per week)
2. Add up monthly hours for all part-time employees
3. Divide part-time hours by 120 hours to get part-time FTE
4. Add full-time count + part-time FTE for your total

This FTE calculation determines whether your organization qualifies as an Applicable Large Employer (ALE) under ACA regulations. Understanding full-time equivalent requirements helps you stay compliant while managing working hours per part-time employee effectively.

How to calculate revenue per FTE

Revenue per FTE measures organizational productivity and helps benchmark performance. The formula is:

Revenue per FTE = Net revenue ÷ Number of FTEs

For example, if your company generated $1 million in revenue with 10 full-time employees working 40 hours and part-time employees working 20 hours (equal to 10 additional FTEs), the calculation would be:

$1,000,000 ÷ 20 FTEs = $50,000 revenue per FTE

This metric helps you compare productivity across teams and identify opportunities to improve efficiency. Full-time and part-time employees contribute differently to this calculation, which is why converting to FTEs provides the most accurate comparison.