What Is FTE? Definition, Examples & Guide

What Is FTE?

FTE stands for full-time equivalent, a unit of measurement that represents one employee working full-time hours. In most organizations, 1.0 FTE equals 40 hours per week or 2,080 hours per year (40 hours × 52 weeks). FTE standardizes headcount across workers with varying schedules, enabling accurate budgeting, benefits planning, and compliance reporting.

For example, two employees each working 20 hours per week (0.5 FTE each) equal one full-time equivalent (1.0 FTE combined). This measurement allows organizations to compare workforce capacity regardless of how many individual workers are employed.

Quick Answer

FTE (full-time equivalent) is a standardized measure where 1.0 FTE = 40 hours/week or 2,080 hours/year. It converts all workers to a common unit for budgeting, planning, and compliance regardless of their actual schedules.

FTE calculations are critical for Affordable Care Act compliance, as employers with 50+ FTE employees must offer health insurance to full-time workers. Accurate FTE tracking prevents costly penalties averaging $2,750–$4,120 per uncovered employee.

How Do You Calculate FTE?

Weekly FTE Calculation

Formula: Total weekly hours ÷ 40 hours = FTE

Examples:

• Employee working 40 hours/week: 40 ÷ 40 = 1.0 FTE
• Employee working 30 hours/week: 30 ÷ 40 = 0.75 FTE
• Employee working 20 hours/week: 20 ÷ 40 = 0.5 FTE
• Employee working 10 hours/week: 10 ÷ 40 = 0.25 FTE

Annual FTE Calculation

Formula: Total annual hours ÷ 2,080 hours = FTE

Examples:

• Employee works 2,080 hours/year: 2,080 ÷ 2,080 = 1.0 FTE
• Employee works 1,560 hours/year: 1,560 ÷ 2,080 = 0.75 FTE
• Employee works 1,040 hours/year: 1,040 ÷ 2,080 = 0.5 FTE

Team FTE Calculation

Formula: Sum of all individual FTE values

Example team:

• 5 full-time employees (40 hours each): 5 × 1.0 = 5.0 FTE
• 4 part-time employees (20 hours each): 4 × 0.5 = 2.0 FTE
• 2 part-time employees (30 hours each): 2 × 0.75 = 1.5 FTE
• Total team FTE: 5.0 + 2.0 + 1.5 = 8.5 FTE

This team has 11 individual workers but only 8.5 FTE—a critical distinction for budgeting and compliance.

What Is the Difference Between Headcount and FTE?

Real-World Example

Department roster:

• 3 full-time employees (40 hours): 3.0 FTE
• 6 part-time employees (20 hours): 3.0 FTE
• 1 part-time employee (10 hours): 0.25 FTE
• Headcount: 10 employees
• FTE: 6.25 full-time equivalents

Budgets are more accurately tied to FTE than headcount since labor costs correlate to hours worked, not number of individuals.

Why Is FTE Important for Workforce Planning?

Budget Planning

FTE enables accurate labor cost projections:

Cost calculation:

• Average fully loaded cost per FTE: $65,000/year (salary + benefits + taxes)
• Planned staffing: 25 FTE
• Annual labor budget: 25 × $65,000 = $1,625,000

This approach is more accurate than multiplying headcount by average salary, which doesn’t account for part-time workers.

Benefits Eligibility

Many benefits have minimum hours thresholds:

• Health insurance: Often offered at 30+ hours/week (0.75 FTE)
• Retirement contributions: May require 1,000 hours/year (0.48 FTE)
• Paid time off: Sometimes tiered by FTE level
• Floating holidays: May be prorated by FTE

Example: A 0.5 FTE employee might receive 40 PTO hours vs 80 hours for 1.0 FTE.

Staffing Comparisons

FTE enables apples-to-apples comparison across departments or periods:

Without FTE, comparing departments would be misleading since headcount doesn’t reflect actual capacity.

Compliance Requirements

Affordable Care Act: Employers with 50+ FTE must offer health insurance to employees working 30+ hours/week. Accurate FTE calculation determines whether the mandate applies.

PPP Loan Forgiveness: Paycheck Protection Program forgiveness was partially based on maintaining FTE levels during covered periods.

WARN Act: Some thresholds for mass layoff notifications use FTE or headcount.

Organizations tracking employee directories should incorporate FTE data for accurate capacity planning and reporting.

How Do You Calculate FTE for ACA Compliance?

The Affordable Care Act uses a specific FTE calculation method:

Step 1: Identify Full-Time Employees

Workers averaging 30+ hours/week (130+ hours/month) are full-time under ACA regardless of FTE.

Step 2: Calculate FTE for Part-Time Employees

Sum all part-time hours, then divide by 120 hours (monthly) or 2,080 hours (annually):

Monthly example:

• Part-time employee 1: 80 hours
• Part-time employee 2: 90 hours
• Part-time employee 3: 60 hours
• Part-time employee 4: 100 hours
• Total: 330 hours ÷ 120 = 2.75 FTE

Step 3: Add Full-Time and Part-Time FTE

Example organization:

• 45 full-time employees (30+ hours/week): 45 FTE
• Part-time employees’ combined hours: 2.75 FTE
• Total FTE: 45 + 2.75 = 47.75 FTE

This organization is below the 50 FTE threshold, so ACA employer mandate doesn’t apply.

Step 4: Monitor Throughout Year

ACA FTE is calculated monthly and averaged. Organizations near the 50 FTE threshold should monitor continuously to determine when mandate triggers.

What Are Common FTE Scenarios?

Seasonal Workers

Scenario: Retail store hires 10 seasonal workers for 12 weeks (3 months), 30 hours/week each

Annual FTE calculation:

• Hours per worker: 30 hours/week × 12 weeks = 360 hours
• Total seasonal hours: 360 × 10 = 3,600 hours
• Annual FTE: 3,600 ÷ 2,080 = 1.73 FTE

Ten workers for three months equals less than 2 FTE annually—important for budget and compliance planning.

Variable Hour Workers

Scenario: PRN employee works varying hours:

• January: 60 hours (0.35 FTE for the month)
• February: 120 hours (0.69 FTE)
• March: 40 hours (0.23 FTE)
• Q1 average: 73 hours/month = 0.42 FTE

Variable workers require monthly tracking to determine accurate FTE over time.

Compressed Workweeks

Scenario: Employee on 4×10 schedule works 40 hours in 4 days

FTE: 40 ÷ 40 = 1.0 FTE

Compressed schedules don’t change FTE since total weekly hours remain the same.

Overtime Hours

Question: Does overtime count toward FTE?

Answer: Typically no. Standard FTE calculations use scheduled or regular hours, not overtime hours. An employee regularly working 50 hours (40 regular + 10 overtime) is still 1.0 FTE.

However, some organizations track “actual FTE” including overtime for capacity planning.

How Do Different Industries Use FTE?

Healthcare and retail tend toward lower average FTE due to extensive part-time scheduling, while technology and manufacturing skew toward higher FTE with predominantly full-time workers.

What FTE Metrics Should You Track?

Average FTE

Formula: Total FTE ÷ Number of employees

Example: 45 FTE across 60 employees = 0.75 average FTE

Lower averages indicate more part-time workers; higher averages indicate predominantly full-time workforce.

FTE by Department

Track FTE separately for each functional area to identify staffing concentrations:

• Sales: 8.5 FTE
• Customer support: 12.25 FTE
• Operations: 18.0 FTE
• Administration: 4.5 FTE

FTE Turnover

Formula: (Departed FTE ÷ Average FTE) × 100

Example: 6 FTE departed from average workforce of 50 FTE = 12% FTE turnover

FTE turnover is more meaningful than headcount turnover since losing a full-time employee has greater impact than losing a minimal part-time worker.

FTE Utilization

Formula: (Productive hours ÷ Total paid hours) × 100

Measures how much of paid capacity actually generates value vs admin, training, or idle time.

Organizations using scheduling software can automate FTE tracking across these metrics for real-time visibility.

What Are Common FTE Calculation Mistakes?

Including Contractors in FTE

Independent contractors should not be included in FTE calculations for benefits or ACA purposes. Only W-2 employees count.

Using 37.5 or 35 Instead of 40

Some organizations define full-time as 37.5 or 35 hours/week. For internal purposes this is fine, but regulatory compliance (especially ACA) uses 30 hours/week as the full-time threshold, not FTE calculations.

Forgetting to Annualize Seasonal Workers

Seasonal employees working 40 hours/week for 3 months are not 1.0 FTE annually—they’re 0.25 FTE (3 months ÷ 12 months).

Not Excluding Unpaid Time Off

FTE should reflect scheduled hours, not hours including extended unpaid leave. Employee on 12-week unpaid FMLA is 0.77 FTE for the year, not 1.0 FTE.

Double-Counting Job Sharing

Two employees sharing one full-time position (each working 20 hours) equal 1.0 FTE combined, not 2.0 FTE.

The Bottom Line

FTE (full-time equivalent) standardizes workforce measurement at 1.0 FTE = 40 hours/week or 2,080 hours/year. Calculating FTE involves dividing total hours by full-time hours (40 weekly or 2,080 annually) for accurate budgeting, benefits planning, and compliance reporting.

FTE differs from headcount—ten part-time workers might equal only 5 FTE. This distinction is critical for ACA compliance (50+ FTE triggers employer mandate), budget planning, and workforce capacity analysis. Organizations should track FTE by department, monitor averages, and use FTE rather than headcount for meaningful staffing comparisons.

Try ShiftFlow’s scheduling tools to automatically calculate and track FTE across your workforce with real-time reporting and compliance monitoring.

Sources

• U.S. Internal Revenue Service – Employer Shared Responsibility Provisions
• Healthcare.gov – Employer Health Coverage
• U.S. Department of Labor – Full-Time Employment

Further Reading

• 4×10 Work Schedule Guide – Compressed workweek planning
• PRN Employee Guide – Managing as-needed workers
• Exempt Employee Classification – Salary and benefits requirements

Frequently Asked Questions

What is FTE?

FTE stands for full-time equivalent, a unit representing one employee working 40 hours/week or 2,080 hours/year. It standardizes headcount across workers with different schedules for budgeting and compliance.

How do you calculate FTE?

Divide total hours by full-time hours. Weekly: total hours ÷ 40. Annual: total hours ÷ 2,080. Example: 30 hours/week ÷ 40 = 0.75 FTE.

What does 1.0 FTE mean?

1.0 FTE means one full-time equivalent employee working 40 hours per week or 2,080 hours per year—the standard full-time schedule.

Why is FTE important?

FTE enables accurate workforce planning, budgeting, benefits eligibility determination, staffing comparisons, and compliance with ACA and other regulations requiring FTE calculations.

What is the difference between headcount and FTE?

Headcount is the number of individual employees. FTE is the full-time equivalent capacity. Ten part-time workers (20 hours each) equal 10 headcount but only 5.0 FTE.

Do contractors count as FTE?

No, independent contractors are not included in FTE calculations for benefits or ACA purposes. Only W-2 employees count toward FTE.

What is a good FTE ratio?

There’s no universal “good” ratio—it depends on industry and business model. Retail averages 0.4–0.7 FTE per employee (high part-time), while technology averages 0.9–1.0 (mostly full-time).

How do you calculate FTE for ACA?

Count employees working 30+ hours/week as full-time. For part-time workers, sum monthly hours and divide by 120 (or yearly hours divided by 2,080). Add full-time count and part-time FTE to determine if you exceed 50 FTE threshold.