Full-time equivalent (FTE) – an important term and concept

This blog has used the phrase full-time equivalent several times, but has not defined it nor delved into its importance (See my posts of June 28, 2006 and July 31, 2006 about how to translate non-lawyer staff into lawyer equivalents.). It’s easier to explain the term by examples than to give a definition.

The most common use of FTE gives precision to the number of, say, lawyers in a law department over the course of a year. If one lawyer joined at the mid-point of the year, she would represent .5 of a full-time equivalent. Another lawyer, who leaves on Oct. 1, would be represented as a .75 FTE. (One can imagine a similar nomenclature for cases. A 1.0 case lasted throughout the entire year; a .5 case settled mid-year or started mid-year.)

Another use of FTE is to describe workload (See my post of Sept. 14, 2005 on hours spent by lawyers during invoice review.). Instead of hours of paralegal work on a matter, for instance, a law department can describe the effort as “.3 FTE paralegals” (See my post of Nov. 5, 2006 about accounting personnel who handled law firm invoices.). Hours worked has more exactitude whereas FTE is a standard measure (although it does not specify how many hours the equivalent person works).

Finally, there are a number of metrics which depend on FTE (See my post of Oct. 18, 2005 on the calculation of fully-loaded internal costs per lawyer hour.). For other examples, consider compensation costs per full-time equivalent lawyer or the ratio of full-time equivalent lawyers per full-time equivalent paralegals.

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