Full-time equivalent (FTE) converts a mix of full-time and part-time staff into a single figure representing how many full-time roles that workforce equals. Two employees each working half-time count as 1.0 FTE between them, even though headcount would show two people.
What it means
FTE is the more accurate measure of workforce capacity than headcount when a business has a meaningful proportion of part-time staff, since it weights people by the hours they actually contribute rather than counting everyone equally.
Where it fits in
Workforce planning and budgeting use FTE to estimate the staffing capacity a given payroll budget can buy, while payroll itself still pays each person according to their own hours and rate, independent of the FTE figure used for planning.
Key rules
- FTE = full-time equivalent, normalising staff by hours worked.
- A more accurate capacity measure than headcount where part-time staff exist.
- Two half-time employees together equal 1.0 FTE.
- Used for workforce planning and budgeting, not for calculating individual pay.
