Full time equivalent (FTE) is a standardisation unit. FTE allows organisations that have resources who are working different days and hours to calculate capacity, utilisation and availability in a standardised manner.
Why is FTE required?
Organisations can have resources that work on different days and different hours and therefore it becomes complicated to calculate overall capacity, utilisation and availability properly. Let us understand this with the help of an example.
Example: Organisation ABC has five employees and they all work different hours every day.
John: 8 hours every day, 5 days per week. Total 40 hours every week.
Adam: 4 hours every day, 5 days per week. Total 20 hours every week.
Nancy: 6 hours every day, 4 days per week. Total 24 hours every week.
David: 4 hours every day, 4 days per week. Total 16 hours every week.
Liz: 10 hours every day, 3 days per week. Total 30 hours every week.
In the above example, it seems that organisation ABC has five resources, but that does not provide the complete picture, because all the five resources are working different number of hours every week.
In such a scenario, if John and David are assigned to 'Project A' for a week for 100% of their individual capacity, then it seems that 2 resources have been utilised on 'Project A', but John's 100% equals 40 hours a week, whereas David's 100% equals 16 hours a week! In such a scenario, FTE can be used to provide a complete picture.
How is FTE calculated?
In order to calculate FTE, the administrator first needs to define what constitutes as Full Time Equivalent (FTE) in their organisation. This can be done by defining one of the working calendars as FTE calendar.
In the above screenshot 'New York' calendar is selected to calculate FTE. The working days and hours for 'New York' calendar have been defined as follows...
It implies that 8 hours per day / 40 hours per week constitutes 1 Full Time resource in Organization ABC.
Below we have shown the capacity of each of the five resources in FTE by using New York calendar as a standard for 1 FTE.
John: 1 FTE
Adam: 0.5 FTE
Nancy: 0.6 FTE
David: 0.4 FTE
Liz: 0.75 FTE
Using New York calendar's 8 hours per day / 40 hours per week, we can state that Organisation ABC's capacity is 3.25 full time resources, out of which 1.4 FTE is assigned on 'Project A'.