What’s an ‘FTE’?
Full-Time Equivalent (FTE) is the measurement of how many full-time and part-time employees a company has. It is NOT headcount. Some people in your business may have only worked for part of the year, or are on part-time/casual arrangements. In these cases, the FTE is less than 1.
Why it’s important to calculate FTEs
It is important to make a distinction between headcount and FTEs because whereas headcount tallies the number of people within the company, FTE converts that number into a measure of all the work that company is paying for – regardless of headcount. This can then be used to more accurately calculate employee productivity and other metrics.
FTE is also necessary to establish like-for-like benchmark comparisons, where evaluating a business against many key performance indicators based on headcount could become inflated and therefore would become meaningless.
See how we use FTEs to benchmark business performance with our sample Benchmark Report.
How to calculate FTEs
FTE Benchmark is calculated as: Number of hours worked by an employee for a period of interest / Number of hours worked by a full-time staff member for the same period
For example, first, determine the number of hours worked by a full-time employee for the period of time you are interested in. A full-time employee may work 40 hours per week, which is five 8-hour days. In a full year their leave allowance might be 4 weeks annual leave and 10 days sick leave, so 52 minus 6 weeks = 46 working weeks. 46 times 40 working hours per week = 1840 hours per year.
To determine the FTE for a person who worked 500 hours in the 12 months ending 30 June of the applicable year and for that position type, the FTE is 500/1840 = 0.28 FTE.
Another way to determine the FTE is based on how many days a week a person works. If an employee works 3 full days per week, the FTE is 3 working days / 5 weekdays= 0.6 FTE
Also, see our post on revenue per employee benchmark calculation
FTEs are just one business performance metric we benchmark in our Australian Business Benchmark Report. With this report you can calculate FTEs for your business and compare your productivity, wages and more against your competitors.
Get a sample of our report to see what we benchmark and how benchmarking may support your business.
Are you an Accountant or Business Advisor?
We work with Accountants and Business Advisors across Australia via our Benchmarking Suite. If you are looking to benchmark your clients, you may be eligible for a free trial. Simply click through below or you can read more about our Benchmarking Suite here.
For more information about FTEs in Australia, visit: https://www.fairwork.gov.au/starting-employment/types-of-employees/full-time-employees