What to Know About Offering Employment Benefits to Part-Time Employees
Determining what benefits small-business owners may want to offer part-time employees can be confusing. Due to minimal federal laws and regulations on the matter, U.S. employers have some flexibility when deciding what employee benefits to offer their part-time workers. However, employers should also ensure they understand and comply with applicable state and local laws and regulations.
This article will cover the following topics about offering part-time employment benefits:
- What is part-time employment?
- What is considered "part-time" hours?
- How many hours is part-time?
- Do part-time employees get benefits?
- 1. Health insurance
- 2. Retirement plans
- 3. Unemployment Benefits
- 4. Overtime laws
- 5. Fringe benefits
What is part-time employment?
Part-time employment is work in which an employee works fewer hours than what an employer considers to be full-time. The exact number of working hours varies from business to business. The U.S. Bureau of Labor Statistics describes part-time employees as individuals working one to 34 hours per week.
What is the difference between full-time and part-time employment?
The main difference between a full-time and part-time weekly schedule is simply that part-time employees work fewer hours than full-time employees. Other than that stipulation, the Fair Labor Standards Act does not define nor differentiate between part-time and full-time employees. It is up to the employer to define these criteria. Employers should be mindful of other laws that may dictate what is considered part-time as well.
What are the advantages and disadvantages of hiring part-time workers?
If you've reached a point where the business is growing, but you're not in a financial position to hire full-time staff, bringing on part-time employees can be a cost-effective way to meet demand. When considering whether to bring additional help on board, hiring part-time workers can offer the following advantages:
Of course, hiring part-time workers isn't foolproof. As with anything, there are potential drawbacks, which may include:
What do you consider "part-time" hours?
Before hiring part-time workers, it's important for business owners to consider creating a policy specifying the number of hours an employee would regularly be scheduled to work as a part-time employee at their company.
Are there minimum hours for part-time?
A minimum of 20 hours per week is common, although the United States Bureau of Labor Statistics' Economic News Release describes part-time employees as individuals working one to 34 hours per week. Note that the Fair Labor Standards Act (FLSA), the federal wage and hour law, doesn't have definitions for part-time or full-time status.
Are there maximum hours for part-time?
There are no set requirements for maximum part-time hours. As previously mentioned, the FLSA doesn't have any parameters around maximum part-time hours. It's the employer's responsibility to outline what the maximum hours for a part-time worker would be, although the maximum number of hours should be less than those of a full-time employee.
Do part-time employees get benefits?
It depends on the benefits and the employer. You may want to only offer statutory benefits (such as workers' compensation insurance, Social Security, or short-term disability insurance — depending on the state), a comprehensive fringe benefit package, or a carefully constructed reduced benefits package. Small-business owners have some freedom to craft their own policy regarding part-time employee benefits, except where applicable law dictates otherwise. A benefits package for part-time employees may entice these workers away from competitors and help enhance employee engagement.
Here are a few benefits to consider offering to your part-time employees when developing your company's policy.
1. Health insurance
Even if health insurance is offered to full-time employees, small-business owners may choose to not offer it to part-time employees. However, expanding these benefits may be seen as an extra perk of employment.
Note that the Affordable Care Act (ACA) doesn't require that employers provide health insurance. However, under the ACA's employer shared responsibility (ESR) provisions, employers with 50+ full-time equivalent employees must offer adequate and affordable health insurance to full-time employees and their dependents or risk a penalty assessment. For ESR purposes, a full-time employee averages 30 or more hours of service a week or 130 hours of service in a month.
Are part-time employees eligible for health insurance?
Eligibility depends on the definition of a part-time employee under federal and individual state laws, to your insurance carrier, and other factors. Check with your insurance carrier to see if they have any other requirements regarding minimum hours to qualify for health insurance. Often, the minimum hours to qualify for health insurance are 20 hours per week, but this may vary depending on aforementioned factors.
2. Retirement plans
Are part-time employees eligible to enroll in an employer-sponsored 401(k) plan? Under the Employee Retirement Income Security Act (ERISA), small-business owners may be required to include part-time employees in qualified retirement plans (including 401(k) plans) offered to other workers. Like health insurance benefits, retirement plan eligibility for part-time employees may also depend on the number of hours worked. The IRS and ERISA specify that a plan may require more than 1,000 hours to be worked during a year to be eligible to participate in the plan.
The SECURE Act includes a provision whereby employers are required to offer 401(k) plan participation to long term part time employees. Those employees must work at least 500 hours per year for a period of 3 consecutive years in order to be eligible. Hours are required to be counted beginning January 1, 2021, so the first year a long term part time employee would be able to contribute is January, 2024. The rule only applies to employee deferral eligibility; these employees may still be excluded from employer contribution allocations.
3. Unemployment benefits
Part-time employees are entitled to unemployment benefits as determined by the state in which the business is operating. Whether a part-time employee receives unemployment benefits sometimes depends upon the hours worked within the last year, wages earned within a certain time period, and if they were laid off, fired, or quit. A business owner might also need to be enrolled in the state's unemployment insurance program.
Choose your state below for information about state unemployment benefits, forms, and details.
District of Columbia
4. Overtime laws
The FLSA requires covered employers to pay non-exempt employees an overtime rate of no less than one and one-half times the employee’s regular rates of pay for all hours worked over 40 in a week. For example, if an employee is paid an hourly rate of $10 during a week, any work over 40 hours in that workweek must be paid at an hourly rate of no less than $15 (assuming there's no additional remuneration to be considered in calculating the regular rate of pay).
Do part-time employees get holiday pay?
Federal wage and hour law doesn't require that employees receive premium pay for working holidays or weekends, unless those hours are actually overtime hours. State and local laws, and/or company policy may dictate whether full-time or part-time employees are paid premium pay for holidays or weekends.
5. Fringe benefits
There are a wide variety of low-cost benefits that may be suitable for your part-time employees. Fringe benefits which are generally included in an employees income, may include personal and sick days, partial tuition reimbursement, a health and wellness stipend, telecommuting options, or even tickets to sporting events.
Do part-time employees get vacation time?
It's up to the employer to decide whether their part-time employees receive vacation time, and if so, how much. As with any benefit explored above, these perks for part-time employees can be mutually beneficial for both you and the employee. Benefits such as vacation time can set you apart from other companies that don't offer this, help in recruiting efforts, and cultivate an engaged and productive part-time workforce. At the same time, part-time staff will likely appreciate benefits such as vacation time, feel more loyal to the business, and have incentive to stay.
When it comes to making decisions about benefits for part-time employees, the number of hours your employees work can dictate eligibility for health insurance and retirement plan options. For other fringe benefits, employers may have more flexibility to set eligibility requirements. But with morale and engagement on the line for part-time employees, business owners should consider offering employee benefits to their part-time employees. Employers should be mindful that just because there may be limited statutory impact at the federal level does not rule out the fact that employers may be restricted by state or local laws. Employers should check the laws of the state(s) and local jurisdiction(s) in which they operate for the requirements around offering benefits.
- Fill gaps in staffing and offers your full-time staff an additional layer of support
- Expand your recruiting efforts with the ability to tap into a talent pool you may have otherwise overlooked
- Gives you the flexibility to meet seasonal demands. This can be helpful for businesses such as retail stores that need more help during the holidays or ice cream shops whose business booms in the summer months.
- Engagement and work relationships may be more challenging, as part-time workers typically don't interface with their full-time counterparts as often.
- Since part-time employees work fewer hours than full-time staff, employees working full-time may feel frustrated about imbalanced workloads.
- Quality of work may not be up to par, given that projects may start or end when part-time team members aren't working, and they may need to catch up (which can hinder overall productivity).