Being a business owner is pretty simple, like riding a bike.

Except no one tells you that the bike is on fire and the road is made of LEGO bricks. Oh, and there’s a giant dinosaur chasing you.

To an average person, this may seem like an exaggerated tale of running a company. However, if you happen to be a CEO, then you’ll probably say, “You missed that the bike has only one wheel.”

Among many things a business owner must do, determining the productivity hours probably tops the list. That’s where Full-Time Equivalent (FTE) calculations come in.

By calculating FTEs, you can gain clarity on workforce efficiency, making it easier to manage resources and optimize your business operations—no fire, LEGO bricks, or dinosaurs involved!

Let’s dive into a step-by-step guide to calculating FTEs.

 

What Is an FTE Calculator?

An FTE calculator is a tool designed to simplify the process of calculating Full-Time Equivalent (FTE).

It helps you determine the total number of hours worked by all employees and express it in terms of full-time employee equivalents.

This is particularly useful for businesses with a mix of part-time and full-time employees, as it allows you to assess the total number of full-time employees your workforce represents.

So, how does it work?

The FTE calculator calculates the total hours worked by all employees and divides it by the number of hours considered “full-time” within your business (e.g., 40 hours per week). This provides a more accurate representation of your workforce’s capacity and needs.

 

Why Is Using an FTE Calculator Important?

Calculating FTE accurately is essential for several reasons:

• Workforce Analysis: It provides insights into how many full-time workers your business needs to achieve its goals.
• Budgeting and Cost Management: Helps with employee headcount calculation so you can plan wages and benefits accordingly.
• Optimizing Productivity: Helps in assessing labor costs versus productivity to ensure efficient resource allocation.
• Compliance: In some jurisdictions, businesses are required to track FTE for reporting purposes (e.g., for determining full-time employee benefits).

Using an FTE calculator can improve decision-making around staffing and budget allocation, ensuring your workforce is aligned with your business objectives.

 

How Can You Use an FTE Calculator for Accurate Headcount?

Here’s a simple, step-by-step process to calculate FTE using an online FTE calculator:

Step 1: Input Total Hours Worked

Start by adding up the total number of hours worked by all employees over a set period (usually a week or month). If employees work varying hours (e.g., part-time employees), you’ll need to include each employee’s total hours worked.

For example:

• Employee A works 40 hours/week
• Employee B works 30 hours/week
• Employee C works 20 hours/week

Step 2: Define Full-Time Hours

Next, define the number of hours considered full-time within your organization. Typically, this is 40 hours per week, but some businesses may consider 35 or 37.5 hours to be full-time.

Step 3: Perform the Calculation

The formula for calculating FTE is:

FTE = Total Hours Worked by All Employees​/Full-Time Hours per Employee

For the example above, if your company defines full-time as 40 hours per week:

FTE = 40+30+20/40 = 1.75 FTEs.

Step 4: Interpret the Result

The result is the total number of Full-Time Employee Equivalent (FTE) in your workforce. In this example, your workforce has 1.75 FTEs, meaning your employees’ combined hours represent 1.75 full-time employees.

This figure can now be used for workforce analysis and decision-making.

 

Calculating FTE for Small Businesses

Small businesses often operate with a mixture of full-time and part-time workers, which makes calculating FTE especially important. Using an FTE calculator can give small business owners a clearer picture of their workforce and help them manage costs effectively.

For example, a small business owner can use the FTE calculator to:

• Analyze Labor Costs: By understanding the total equivalent full-time hours, business owners can estimate wage costs and plan for future staffing needs.
• Plan for Growth: Accurate full-time employee calculation can help determine whether additional staff is needed or if existing employees need to work more hours.
• Improve Efficiency: It allows small business owners to assess whether their current workforce is sufficient to meet demand, ensuring that they don’t overstaff or understaff.

 

Common Mistakes to Avoid When Using an FTE Calculator

To ensure your employee headcount calculation is accurate, here are a few common mistakes to avoid:

• Not Accounting for Unpaid Leave: Be sure to exclude hours employees take for unpaid leave, as these don’t count toward their FTE.
• Inaccurate Hour Definitions: Make sure you know what counts as a full-time workweek in your company, as definitions may vary.
• Rounding Errors: When calculating FTE, avoid rounding prematurely—wait until after the full calculation is completed.

By avoiding these mistakes, you can ensure a more accurate assessment of your workforce, which will lead to better decision-making.

 

Calculate FTE Without Breaking a Sweat

Using an FTE calculator is essential for businesses looking to optimize their workforce and manage costs effectively.

Whether you are calculating FTE for small businesses or performing a workforce analysis for a larger company, this tool simplifies the process and provides valuable insights.

Calculating full-time employee equivalents allows business owners to make smarter decisions about staffing, budgeting, and resource allocation.

Accurately calculating FTE helps small businesses, in particular, manage operational costs while ensuring a balanced and efficient workforce.

If you need help calculating FTE for your organization, choose from one of our many calculators to get an accurate figure.