Part-Time vs Full-Time Employees: What To Consider When Hiring
The difference between part-time vs full-time employment often goes beyond the number of hours worked each week. When it comes to time-tracking and the payroll process, companies may need to take additional steps to integrate part-time schedules into their systems. An updated job analysis and an understanding of the job-related impacts of employing a full- or part-time employee can help you allocate responsibilities appropriately among your staff.
Why It's Important To Assess Potential Differences Between Part-Time and Full-Time Work
Employers should review the job requirements when considering the viability for part-time and full-time hours. Can the work demands be met on a part-time schedule? Squeezing a full-time job into a part-time position may place additional pressure on both the employer and employee. Often employees choose part-time jobs due to a desired work-life balance or personal time constraints. They may not be able, or willing, to work extra hours when needed.
Aside from hours worked, job classification and benefits may also be handled differently for part-time versus full-time employees. Hours will still need to be tracked and paid accordingly, including overtime pay where applicable, in compliance with the Fair Labor Standards Act (FLSA) and applicable state/local laws.
Benefit eligibility may be a differentiator between part-time and full-time jobs. Companies will need to comply with applicable laws and regulations depending on the type of benefits. This may include the Employee Retirement Income Security Act of 1974 (ERISA) and the Affordable Care Act (ACA), explained in more detail below.
What Are the Differences Between a Part-Time vs Full-Time Employee?
The distinction between a part-time versus a full-time employee is generally made by the employer, using job roles and expectations, along with ensuring compliance with applicable federal, state and local laws and regulations.
To help determine whether a position should be part-time vs. full-time, consider what type of work is being conducted and how long it takes to fulfill the job requirements. Keep in mind that with the recent changes to the workplace due to the impacts of the COVID-19 pandemic, many employees may need an alternative schedule to accommodate childcare or other family responsibilities but continue to need to work full-time. Other workers may make a conscious choice to work fewer hours, or they may do so because they are unable to find full-time employment in their desired field.
Benefits offered may differ between part-time vs. full-time jobs. Federal, state, or local regulations may dictate certain requirements for part-time workers. Eligibility for most fringe benefits, including vacation, can be determined by the employer. For example, many employers choose to provide part-time employees with a prorated amount of vacation compared to full-time employees. Offering fringe benefits can assist with recruiting and retention of part-time employees similar to full-time employees. Companies should look at the job market and determine which benefits for part-time employees are most desired and cost-beneficial.
Under the ACA, applicable large employers (ALE) must offer minimum essential coverage to at least 95% of their full-time employees and their dependents or risk a potential assessment if at least one full-time employee receives a premium tax credit. This tax credit assists with the cost of health insurance purchased through a Health Insurance Marketplace. Even if the offer-of-coverage threshold is met, the ALE is at risk of a second type of assessment if it does not offer affordable coverage that meets minimum value to its full-time employees, and one or more of these employees receives a premium tax credit.
An ALE under the ACA is defined as an entity with an average of at least 50 or more full-time employees during the prior calendar year, including full-time equivalent employees. The ACA definition of full-time is an average of 30 hours or more per week (or 130 hours per month), so it's important to examine your current employee base for compliance purposes. Hours worked by non-full-time workers, including part-time workers, must also be counted in the calculation of full-time equivalent employees. Combine the number of hours of service of all non-full-time employees for the month, but do not include more than 120 hours of service per employee. Divide the total by 120 to calculate average hours worked.
Smaller employers are not required to offer health insurance under the ACA, but it's up to the individual company to weigh the costs and benefits of offering health insurance to both full and part-time employees.
When hiring part-time vs. full-time workers, keep in mind that payroll taxes must be withheld for all employees, regardless of their full-time or part-time status. No matter how many hours an individual employee works, employers will still collect and remit federal income taxes, along with Medicare and Social Security taxes. Any required state or local employment taxes must also be withheld, and workers' compensation laws also apply to part-time workers.
Laws and Legal Differences
Classification of part-time and full-time employees is ultimately an employer's decision, except where dictated under specific employment laws. For example, as mentioned above, if any part-time employee works an average of over thirty hours per week, they may be considered full-time under the ACA applying rules for determining employee status as full-time. An ALE must offer full-time employees affordable and adequate coverage or risk an assessment if at least one full-time employee receives a premium tax credit.
Part-time workers who are on the job for at least 1,000 hours per year are also covered by ERISA, which gives them eligibility to participate in company-sponsored retirement plans.
Documentation is essential when distinguishing between part-time and full-time employees. Defining categories of employment, including full-time vs. part-time status, helps to ensure that internal policies are applied consistently throughout the company and can help avoid future legal action.
Offering Part-Time vs Full-Time Employment: Pros and Cons
Jobs should be designed to meet business needs, based on anticipated work responsibilities. There are some pros and cons to offering full-time vs. part-time employment that may also factor into the final decision. Consider the following:
Increases the talent pool — When companies are struggling to fill positions, expanding hiring to include more part-time positions can increase the number of interested applicants.
Fulfills certain hiring needs — Part-time positions may attract job seekers with unique skills who cannot or do not want to work full-time.
Cost savings — Lower compensation and tax costs due to fewer hours and potential benefits savings. May also help mitigate overtime expenses.
Work efficiency — A part-time position may be more efficient if job responsibilities can be met on a shortened schedule.
Time constraints — A part-time schedule may not be enough time to fully complete job responsibilities on a timely basis. Also, deadlines may need to adjust to accommodate part-time workers.
Scheduling logistics — Part-time schedules are an additional element that should be integrated into a time and attendance system and tracked alongside full-time schedules.
Inefficient cost savings — Employees with reduced hours may still be entitled to benefits such as health insurance, which can make the cost of part-time positions less beneficial compared to a full-time worker who may handle additional responsibilities.
Commitment — Full-time workers may show a greater commitment to the company.
Recruiting advantages — Full-time positions may be more attractive for those seeking career progression and career development.
Ease of scheduling — Fewer employees to manage if all work full-time schedules versus multiple people working reduced schedules.
Costs — Higher financial investment in full-time workers' compensation to cover additional hours and benefits, including overtime hours.
Range of skills — Some highly skilled individuals may only want to work on a part-time basis, limiting company options.
Striking a Balance When Hiring Part-Time and/or Full-Time Employees
Both part-time and full-time workers can add value to your company, but it will be important to establish criteria for part-time status in compliance with applicable laws and consistent with your company's budget and compensation goals. Identifying positions that are conducive to part-time employment and applicants seeking part-time positions can help you make productive staffing decisions. When employees are working a schedule that allows them to be successful, they are likely to be more satisfied and engaged while on the job.