The term "full time equivalent" refers to the number of hours served by a single full time employee during a given time. Part time and contract employee hours will be converted to FTE units by combining part time and contract employee hours and dividing the number by the FTE. This is a simple way to demonstrate how many “full time” workers are on the payroll.
This way of FTE helps organizations for cross comparisons between full time employees working in any company and the workers employed on the basis of the contract and part timers. This comparison further helps the employers to look into the number of units produced in total and in a segregated manner by the former and the latter, and have a result at hand ready to take further decisions regarding recruitment requirements in future, those might be seasonal, contingent basis or on a daily wage basis, as per the required scenario of the Organizational HR needs. In a nutshell, this helps employers for manpower planning purposes.
Related: Applicable Large Employer (ALE)