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 payroll processes, companies should take additional steps to integrate part-time schedules into their systems.

An updated job analysis and understanding of the job-related impacts of employing a full- or part-time employee can help you allocate responsibilities appropriately among your team.

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 of part-time and full-time hours. Can some work demands be met on a part-time schedule? Squeezing a full-time job into a part-time position may pressure both the employer and the employee. Often, employees choose part-time jobs due to a desired work-life balance or personal time constraints. They may be unable or unwilling to work extra hours as needed.

What Is Considered Full-Time Employment?

Full-time employment is just as it sounds—employees who work full-time, typically with 40 hours weekly serving as the standard benchmark. However, the Bureau of Labor Statistics (BLS) defines full-time employment as 35 or more hours weekly. The Affordable Care Act (ACA), on the other hand, defines full-time employment as an average of 30 or more hours weekly.

With full-time employees, employers must consider:

Statutory benefits, such as Social Security and Medicare, unemployment insurance, workers’ compensation insurance, and specific leave under both the FLSA and state law. Typically, only considered for full-time employees, some of these statutory benefits may also apply to part-time workers. Workers’ compensation will pay lost wages and medical costs for employees who become ill or injured as a direct result of their job as well as state unemployment benefits that may pay partial benefits to part-time employees who were terminated involuntarily.

More comprehensive employee benefits packages, which may include retirement and health benefits in addition to paid time off and professional development. Employers considered Applicable Large Employers must offer full-affordable and adequate health insurance benefits under the ACA or risk a potential assessment if at least one full-time employee receives a premium tax credit when buying coverage in a government marketplace.

What Is Considered Part-Time Employment?

Part-time employees typically work a reduced schedule, with 35 to 40 hours per week being the norm for full-time employment.

However, both the BLS and the Internal Revenue Service (IRS) define part-time employment. For example, the BLS defines part-time employment as working between 1 and 34 hours weekly. The IRS, on the other hand, defines full-time employment as working an average of at least 30 hours per week for purposes of the ACA.

Employers must track part-time employee hours for overtime pay. The FLSA defines overtime as any hours worked above 40 hours weekly for non-exempt employees. Employees who work more than 40 hours weekly are entitled to time and a half for each hour worked beyond 40 hours. Although it’s uncommon for part-time employees to be eligible for overtime due to their reduced hours, it’s not impossible, for example if part-time employees cover other workers’ shifts or work during busy times of the year, like the holidays.

Finally, part-time employees don’t typically enjoy the same benefits as full-time workers. Your employee handbook should be clear as to which benefits are offered to part-time employees and which are offered to full-time employees. However, part-time employment offers flexibility, benefiting both employees and employers.

Employee Benefits

Benefits offered to part-time or full-time employees may differ. Federal, state, or local regulations may dictate that certain benefits be provided to part-time workers.

The employer can typically determine other benefits, such as fringe benefits. For example, an employer may provide part-time employees with a prorated amount of vacation compared to full-time employees.

Offering fringe benefits can assist with recruiting and retaining part-time employees in a similar way to full-time employees. Companies should examine the job market and determine which benefits for part-time employees are most desired and cost beneficial.

Health Insurance Requirements

Under the ACA, applicable large employers (ALEs), which are defined below, through a federal or state health insurance marketplace.

Even if the offer-of-coverage threshold is met, the ALE is at risk of a second type of penalty if it does not offer affordable coverage that meets the minimum value to its full-time employees and one or more of these employees receives a premium tax credit when securing health insurance on a marketplace.

Under the ACA, an ALE is defined, in general, 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 essential to examine your current employee base to ensure you comply with the ACA.

Hours worked by non-full-time workers, including part-time workers, must also be counted in the calculation of full-time equivalent employees (FTEs). Combine the number of service hours of all non-full-time employees for the month but do not include more than 120 hours per employee. Divide the total by 120 to calculate the number of FTEs for each calendar month.

The ACA does not require smaller employers that aren’t ALEs to offer health insurance. Instead, each company can weigh the costs and benefits of offering health insurance to both full- and part-time employees, depending on their workforce and business goals.

Tax Implications for Part-Time vs. Full-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. Workers’ compensation laws also apply to part-time workers.

Documentation is essential when distinguishing between part-time and full-time employees. Defining categories of employment, including full-time vs. part-time status, helps ensure that internal policies are applied consistently throughout the company and can help to avoid future legal action.

Laws and Legal Differences for Part-Time vs. Full-Time Employees

Classification of part-time and full-time employees is generally 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 30 or more hours per week, they may be considered full-time under the ACA. An ALE must offer full-time employees affordable and adequate coverage or risk potential penalties 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 take part in company-sponsored retirement plans. Thanks to SECURE Act 1.0 and 2.0, employers must now allow certain long term part-time workers who are on the job for at least 500 hours per year over 2 consecutive years to take part in workplace retirement plans.

Financial Impact of Hiring Part-Time vs. Full-Time Employees

When recruiting and hiring top talent, you should consider the financial impact on your business. For example, when hiring part-time employees, your compensation and benefits costs may be lower than with full-time workers since those employees will typically work fewer hours and receive fewer benefits. Part-time schedules can help you save on benefits administration costs related to retirement, health insurance, flexible spending accounts, leaves, and paid time off.

On the other hand, your compensation and benefits costs may be higher with full-time employees. Additionally, you may invest more in training, development, and licensing for your full-time workers. However, your full-time workers may be more engaged and loyal, boosting productivity and adding to your bottom line.

Striking a Balance When Hiring Part-Time and Full-Time Employees

Both part-time and full-time workers can add value to your company. Still, it will be essential to establish criteria for part-time status in compliance with applicable laws and consistent with your company’s budget and growth goals.

Identifying positions conducive to part-time employment while attracting applicants seeking part-time schedules can help you make productive staffing decisions while retaining top talent. When employees work a schedule that allows them to be successful, they are likely to be more satisfied and engaged while on the job.

When hiring and managing full-time and part-time workers, don’t go it alone. Team up with a dedicated HR Professional at Paychex, who can help you navigate challenges and assess your HR needs – all while being proactive.

For more information reach out to:

John Heidenreich
jheidenreich@paychex.com
720.252.8355