Part-time vs. Full-time Benefits & Laws: What Employers Need to Know

Employment trends have shifted significantly over the past couple of years. The global pandemic has influenced every aspect of our lives, and it hasn’t spared the work culture or the job market. 

During the lockdown, employees discovered new priorities. Some even went as far as to switch to part-time employment to spend more time with their families. The remote work culture also opened up the job market for them now that they are not bound to one city or state.

Some prefer combining remote with part-time work and traveling around the country, even across borders and enjoying a “nomadic” lifestyle. And employers know that a happy employee is a productive employee – no matter where they work from.

On the other hand, other workers discovered they were not big fans of remote or part-time work and wanted to return to the office. This difference of opinion created a wonderful balance in the job market.

Employers learned an important lesson. Their employees could be equally, if not more productive when working remotely or dividing their time between the office and their home. They also realized that part-time employees could help bridge many gaps that can occur in their business operations.

Employees have many employment options now, but so do you as an employer. Deciding what’s best for your business is not an easy task, so we are here to help you find the right solution.

The Difference Between Part-time and Full-time Employment

The main difference between part-time and full-time employees is that the former work fewer hours than the latter. The precise number of hours considered part-time employment is not specified, and it is up to the employer to design specific policies for their company. Reports indicate that employers’ range for full-time employees is usually between 32 and 40 hours.

Some employers classify everyone working 40 hours or more per week as a full-time employee and those working less than 35 hours as part-time. Others count employees working more than 35 hours per week as full-time. Whatever your policy is, ensure that you state it clearly in the documents your employees sign with you.

Under the Affordable Care Act (ACA), the IRS defines a full-time employee as someone employed on average at least 30 hours per week, or 130 hours per month. They don’t regulate how many hours a part-time employee works a day, or per week, which gives flexibility to both the employer and the employee. The sides can agree to divide those hours equally among workdays or pull longer hours on certain days.

Laws and Regulations: What You Need to Know

Regulations are pretty loose when it comes to defining the limiting hours of part-time and full-time employment. Still, employers need to obey certain laws and acts that determine their obligations towards their employees.

The Affordable Care Act dictates that employers who employ more than 50 full-time employees or equivalents must provide the option of having essential health insurance benefits to all their employees. Those employers are classified as Applicable Large Employers. They also need to file Form 1095-C to the IRS, reporting about the healthcare benefits offered to all their employees during the calendar year.

If you are unsure about what it means to have 50 full-time employees or equivalents, here’s a brief explanation. The easiest way to calculate how many full-time employees you have is to divide the total number of hours all your employees worked during one calendar year by the average full-time annual work hours for one employee.

The formula for calculating full-time equivalents is slightly different. You need to add up the number of hours all your part-time employees put in during one month (up to 120 hours per person) and divide that number by 120. That will give you the number of your full-time equivalent employees.

You can get the final number the IRS requires from you by combining the two above numbers, and if the sum exceeds 50, you are officially an Applicable Large Employer. Beware that if you fall into this category and don’t offer minimum essential health insurance coverage to your employees, you risk facing severe fines from the IRS.

Another applicable law is the Fair Labor Standards Act. The FLSA determines the minimum wages, overtime pay, and recordkeeping for all private-sector and government employees. It doesn’t differentiate between part-time and full-time employees, and its rules apply to all. 

For example, every employee who works more than 40 hours a week is entitled to overtime pay, which is one and a half times their usual wage rate.

You should also be aware that, under the law enforced by the Equal Employment Opportunity Commission, it is illegal to discriminate against the employees and offer different benefits based on protected characteristics such as race, gender identity, religion, and others.

Part-time vs. Full-time Benefits: What to Offer to Your Employees

Statutory benefits include social security and medicare, unemployment insurance, and workers compensation insurance, but this can vary depending on the state. Apart from the benefits that the law requires you to offer your staff, businesses often include other benefits to attract and retain talent.

Recently, researchers have conducted numerous surveys among part-time and full-time employees. They found that offered benefits were often deciding factors when people choose their following employment.

Small businesses with less than 50 employees are not required by law to offer health insurance or any other benefits to their employees. However, even small businesses choose to provide certain benefits to their staff if they can afford to pay them.

As mentioned above, apart from the Affordable Care Act that regulates Applicable Large Employers, there are no laws requiring companies to give health benefits to their employees. Businesses are at liberty to design their own policies regarding the benefits they offer. Every employee should be aware of the company benefits plan and sign it when signing their employment contract.

Health insurance is probably the crucial benefit employees look for when choosing employment. Usually, full-time employees get it, but companies tend to extend it to their part-time employees to attract top candidates. Note that you should check federal, state, and local laws and consult your insurance carrier to determine part-time employees’ benefits eligibility.

Other Benefits and Perks Employees Appreciate

Employers that offer employer-sponsored 401(k) retirement plans to their full-time employees might be required to do the same for their part-time employees. This requirement depends on the number of hours the part-timers put in monthly, so employers should check the legal minimum of hours worked before offering this benefit.

Employees also deeply appreciate when companies offer vision and dental insurance, given that those services can be very pricey when an individual pays for them on their own. Paid vacation time has also become essential to job seekers, so you should consider extending this benefit to all employees.

The job market is highly competitive, and if you want to attract talent and lower turnover, consider offering additional perks to your employees. For example, there is a growing demand for flexible schedules and remote work, especially since the traditional 9 to 5 model is long outdated. Remote work has become a new normal for many companies, and they now offer it to all their employees.

Paid parental leave is also one of the perks people ask for from their employers as it moves up on their benefits priority list. Including some paid sick leave into your offer could also be a good perk your employees would appreciate.

It is up to you to decide whether or not to offer the same or similar benefits to your part-time and full-time employees. Note, however, that part-time workers are increasingly in demand with the new employment trends, and it might be challenging to attract them to your company without offering the benefits they demand.

The financial aspect is also an important factor when deciding what benefits to extend to your employees. The number of employees and the actual benefits you want to give your staff are the main factors that influence the cost of your benefits program.

Part-time vs. Full-time Employment: Pros and Cons for Employers

Before deciding if you should hire part-time or full-time employees, have a look at some of the pros and cons of both options:

Pros of hiring part-time employees:

• Workplace flexibility: Part-time employees bring schedule flexibility if you need someone to jump in on a project or fill in some personnel gaps.
• Lower costs: You pay hourly wages instead of monthly salaries, and it’s up to you to decide what benefits you want to offer.
• Reduces stress and balances schedules: Hiring additional people can help complete tasks on time when the workload gets too heavy. It can also eliminate the danger of overburdening your other employees, who will be less stressed and more productive.

Cons of hiring part-time employees:

• Less commitment to the company: Since they work fewer hours and might also have more than one employer, you can expect part-time workers to be less committed to meeting company goals or contributing to company culture.
• Inconsistent schedules: If your part-time employees work at two or more companies, adjusting their schedules to your needs will be more challenging. They might even need to choose what project to prioritize when they get overlapping schedules.
• Potential inefficiency: Managers will need more time to train their employees and to adjust their schedules.

Pros of hiring full-time employees:

• Loyalty to the company: When employees work exclusively for one employer, they are more dedicated to their jobs and the company.
• Higher productivity: Working 40 hours a week with the same colleagues makes collaboration easier. If employees are entirely devoted to their job, they should be more productive.
• Easier planning and scheduling: Project planning becomes simpler when managers know they can count on their employees full-time.

Cons of hiring full-time employees:

• Higher work-related stress levels: Your full-time employees can become overworked if you require them to put in long hours regularly. They would struggle with managing a healthy work-life balance which could eventually lead to burnout.
• Increased costs: Your salary and benefits expenses increase when you hire more full-time workers.

Both options have their advantages and disadvantages, and your business needs are the best indicator of what kind of employees you need. You should decide whether to hire part- or full-time workers, or both only after consulting with your managerial team and your hiring experts. Beware that this is not set in stone, and your hiring preferences can change anytime if your business needs to shift.

It’s a fact that the job market is becoming increasingly competitive. You should keep up with the trends and employee preferences if you want to hire top talent. As much as your finances allow, try to offer competitive benefits to part-time and full-time employees.

Ask your current employees and employment candidates to list the benefits they think are essential, and that should help you decide what to prioritize.

If you can’t offer full benefits to all your employees, consider including them in your discounted health and retirement programs. By doing so, you would allow them to pay less than the market price for those programs if they had to handle them independently.

If you need help designing your benefits plan, don’t hesitate to reach out to our experienced brokers, who can assist you with finding the best option for your company.