What are annual hours used to represent one full-time equivalent (FTE) for budgeting?

• A. 2,080 hours
• B. 1,600 hours
• C. 208 hours
• D. 2,600 hours

Answer: (B)

The idea being tested is how we translate staffing needs into a single unit of measure called a full-time equivalent (FTE) by using annual hours. An FTE represents the amount of work one full-time employee is expected to perform in a year, so budgeting often converts total hours into FTEs using a standard number of hours per year.

Using 1,600 hours as the annual hours per FTE comes from roughly 200 working days per year at 8 hours each. This accounts for weekends and typical time off, holidays, and leave, providing a practical and stable baseline for budgeting across departments. So, when you budget, you divide the total hours planned for a role or department by 1,600 to express that workload in FTEs. For example, 3,200 planned hours in a year would equal 2 FTEs using this standard.

It’s worth noting that different organizations sometimes use different baselines (like 2,080 hours) depending on their assumptions about holidays and time off, but in this context the standard used is 1,600 hours.