How to calculate FTEs?
Full-Time Equivalents (FTEs) are calculated by estimating workload volumes and applying FTE efficiency ratios.
Formula:
- Workload Volumes × FTE Efficiency Ratios = Required FTEs
1. Workload Volumes
The total expected number of activities or outputs within a specific period.
- Example: 120 employee onboarding sessions per year.
2. FTE Efficiency Ratios
The number of FTEs needed to complete one unit of activity.
- Example: 0.025 FTE per onboarding session.
3. Outputs
The total number of employees (FTEs) required based on the workload.
- Example: 120 sessions × 0.025 FTE = 3 FTEs required per year.
Three key design principles are considered in order to develop manpower requirements:
1. Lean Organization
Manpower requirements should be optimized ensuring the building of inhouse capabilities according to company needs and management & oversight of other outsourced functions continuously or on an as-needed basis.
2. Increasing Efficiency Factor
An Efficiency Factor is adopted to account for the increasing efficiency / productivity of manpower with time for repetitive tasks, allowing the same workload to be completed by less FTEs.
Tip: To apply an efficiency factor, reduce your FTE Efficiency Ratio over time. For example, if productivity improves by 20%, reduce 0.5 FTE to 0.4 FTE for the same activity.
3. Organization Phasing
Manpower requirements for each function depends on the organization lifecycle stage of a given company.