Counting headcount properly: FTE, part-timers and people with two jobs
Two people can look at the same team and get 20, 18 and 24. All three can be right. It depends what you are counting.
5 minute read · part of the free minekop guides
Headcount is the number every plan hangs off. Payroll is usually the largest single cost in a small company, and payroll is headcount times average pay. Get the count wrong and every number below it is wrong too.
The trouble is that "how many people work here" has at least three sensible answers, and people quote whichever one flatters the point they are making.
Three different numbers
| Number | What it counts | Good for |
|---|---|---|
| People | Unique human beings. Somebody with two jobs counts once. | Desks, laptops, health insurance, the size of the Christmas party. |
| Headcount (FTE) | Full-time equivalents. A half-time person counts as 0.5. | Payroll, capacity, cost per head. |
| Boxes | Positions on the chart, filled or not. | Structure, spans of control, the hiring plan. |
A worked example. A team has 20 people. Three of them hold a second role as well, so the chart has 23 boxes. Four of the 20 work half time. Headcount is therefore 16 full-timers plus 4 halves, which is 18.0 FTE. Add one vacancy you are recruiting for and the chart has 24 boxes, still 20 people, and 19.0 FTE once the seat is filled. All four numbers — 20, 18.0, 23, 24 — describe the same team.
Part-time: use fractions, not a separate list
The lazy way is to keep a headcount of "full-timers" and a note somewhere saying "plus a few part-timers". It falls apart the moment you budget, because the part-timers still cost money.
Give everybody a fraction of a full week. Half time is 0.5. Three days out of five is 0.6. Somebody on a four-day week is 0.8, and yes, that means a company that has moved everybody to four days has an FTE count 20% below its people count.
Then payroll is simply FTE times the full-time rate for that role, which is a sum you can check.
People with two jobs
In a small company somebody is always doing two things. The finance manager also runs office admin. A founder is both CEO and head of sales until the first sales hire lands.
They should appear twice on the chart, because both jobs are real and both need a line to a manager. They must count once in people, and once in FTE — you cannot pay somebody twice for one week of work.
This is the single most common counting error, and it is always in the same direction: charts overstate the team. If your headcount comes from counting boxes, every dual role inflates your payroll forecast.
Open roles
A vacancy is a box with nobody in it. It belongs on the chart — that is how a hiring plan becomes visible — but it is not a person and it is not yet a cost.
Keep it separate in the count, and give it a start month in the budget. A role you plan to fill in September costs you four months of salary this year, not twelve. Budgets that assume every hire lands on 1 January are wrong by a large margin, always in the expensive direction.
Contractors, agencies and interns
These are the grey areas. There is no universally right answer, so pick a rule and write it down:
- A contractor doing a full-time job is 1.0 FTE for capacity planning, even though they are not on payroll. Otherwise your team looks smaller than the work it does.
- An agency is a cost, not a head. It goes in overheads. You do not know or control how many of their people touch your account.
- Interns count at whatever fraction they actually work.
The point is consistency. A number that is defined differently each quarter is worse than a number that is slightly wrong the same way every time, because at least the second one has a trend you can read.
Spans of control
Once the counting is right the chart tells you something new: how many people each manager carries. There is no magic number, but the shape of the problem is familiar.
- One or two direct reports usually means a layer that does not need to exist.
- Around five to eight is where most people can still do the job properly.
- Beyond ten, one-to-ones stop happening and things start being missed.
Work that has to be identical every time — a support desk, a production line — supports much wider spans than work that needs judgement. Read the number, then ask what kind of work it is.
Where the number goes next
Headcount feeds the budget. Multiply FTE by average cost per head, remembering that cost per head is not salary: add employer taxes, pension, insurance, equipment and the desk. In most countries the true cost of an employee is somewhere between 1.15 and 1.4 times their gross pay, and the exact figure depends on where you are.
That total lands in overheads, which is the subject of the SG&A guide.
Try it
It shows people, headcount and boxes separately.
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