An organizational entity such as a department typically has three resources: Competence, Time and Money. These resources are employed in Activities which in turn give Results. Money is probably the most monitored and best understood of them, but here we will have a look at the TIME resource.
First, a company's perspective on time:
Out of the three categories, Non-Work days are irrelevant for a company. The agreement between an employer and an employee covers the two categories: Work Time and Free Time. By applying a standard number of work hours to one work day, we get to a standard number of hours for one full-time employee.
The Standard Work Time defines how many hours should be worked. In reality, there will be “unplanned” changes such as Overtime (more hours than standard) and Downtime (sick leave, for example). So, employee time follows into one of these categories:
Total work hour capacity is therefore made of Ordinary Work Time (standard) and Unplanned Work Time (non-standard). In addition, a company may contract freelance or consultancy work time which is measured as hours delivered and can be called Flexible Work Time. All three sum up to the total work hour capacity of an organizational entity.
Changes in Standard/Reference capacity versus Actual capacity can be understood as the sum of several effects:
FTE Effect - changes in the number of full time employees
FTE Effect on Capacity = (FTE_Current - FTE_Reference ) × Standard Work Time
Work Hours Effect - deviation in actual work hours vs. standard
Work Hours Effect on Capacity = FTE_Current × (Actual Work Time - Standard Work Time)
Work Hours Effect can be split into several effects to get further insight into the causes of work hours deviation to standard:
Work Hours Effect on Capacity =
Ordinary Hours Effect [Actual Ordinary - Standard Time]
+ Overtime Hours Effect [Actual Overtime]
+ Unplanned Free Time Effect [Actual Sick / Other Leave]
+ Flexible Work Time Effect [Hired Capacity]
Availability Effect - in case a certain availability level is agreed either in general or towards several activities:
Availability Effect on Capacity = FTE_Current × Actual Work Time × (Actual Availability - Reference Availability)
The sum of these effects adds up to explain changes in work time capacity. I found this approach useful in a project environment with several competence areas and projects which have different competence profiles at different points in time.