Using FTE and Resource-Based Capacity
A resource planning formula will use several important variables. First, you need to understand the Full-Time Equivalent or FTE of employees. FTE is a unit of measure that indicates the amount of capacity or availability of an individual to work during a specified time period. You’re probably already familiar with FTE, but if you are experiencing a lot of resource conflicts, the issue could be how you calculate FTE.
Calculating FTE involves two things:
(1) what is considered full-time hours for a company and
(2) how many hours an employee is working.
It’s unlikely you are making mistakes regarding how much an employee is working, so let’s break down how a company determines what its full-time hours are.
Depending on location and industry, employees may follow different calendars. A person working in the U.S. likely has a few different holidays than someone in Canada. Certain industries include weekends as workdays while others don’t. To determine full-time hours for your company, you’ll need to know which days are considered workdays, which days are holidays and how many hours a day people typically work. Many organizations in the U.S. follow a 40-hour workweek to represent full-time work, but this might not be the case for your organization. Maybe your office closes early every other Friday or maybe some employees work longer shifts.
Once you’ve defined full-time hours, you can calculate FTE by dividing the amount of time an employee works by your full-time hours:
If an employee works 40 hours a week and your organization has defined full-time hours as 40 hours a week, then that employee counts as 1 FTE. It’s possible that some employees may count as more than 1 FTE while others as less. An individual working 45 hours one week instead of your organization’s full-time 40 hours would count as 1.13 FTE. Inversely, part-time employees will count as less than 1 FTE.