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.

Additionally, benefit eligibility may be a differentiator between part-time and full-time jobs. Companies must follow 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), which are explained in more detail below.

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.

What Are the Differences Between a Part-Time vs. Full-Time Employee?

The distinction between a part-time and a full-time employee is generally made by the employer, using job roles and expectations in conjunction with any applicable federal, state, and local laws and regulations.

Part-Time Hours vs. Full-Time Hours

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 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 while continuing to work full-time. Other workers may consciously choose to work fewer hours, or they may do so because they cannot find full-time employment in their desired field.

How Many Hours Is Part-Time?

Determining how many hours a part-time employee works often varies from industry to industry and employer and employer. According to the U.S. Bureau of Labor Statistics, part-time hours are 1 to 34 hours per week. Most employers view part-time hours as any work schedule with fewer than 30 - 35 hours weekly.

Of course, employers must remember that if an employee works an average of 30 or more hours per week, the ACA considers them to be full-time.

How Many Hours Is Full-Time?

Full-time hours, on the other hand, are typically 35 or more hours per week. The U.S. Bureau of Labor Statistics considers 35 or more hours weekly to be full-time. However, we can't forget the ACA. Under the ACA, an average of 30 or more hours per week is full-time.

Employers must carefully track employees' hours to ensure they are part-time or full-time when determining which benefits should be offered to an employee.

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.

Offering Part-Time vs. Full-Time Employment

Jobs should be designed to meet business needs, based on anticipated work responsibilities and experience or expertise. 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:

Advantages of Part-Time Employment

• Increasing the talent pool: When companies struggle to fill positions, expanding hiring to include more part-time positions can increase the number of interested applicants.
• Fulfilling specific hiring needs: Part-time positions may attract jobseekers with unique skills who cannot or do not want to work full-time.
• Cost savings: The employer may enjoy lower compensation and tax or benefits costs due to fewer hours. Part-time employees 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.

Disadvantages of Part-Time Employment

• Time constraints: A part-time schedule may not provide enough time to complete job responsibilities on a timely basis. Also, deadlines may need to be adjusted to accommodate part-time workers.
• Scheduling logistics: Part-time schedules are an additional element to integrate into a time and attendance system and track alongside full-time schedules.
• Inefficient cost savings: Employees with reduced hours may still be entitled to certain benefits, such as health insurance, which can make the cost of part-time positions less beneficial than a full-time worker who may handle additional responsibilities.
• Impact on employee morale: With less consistent work hours may come a diminished sense of purpose among your employees, leading to less-than-optimal productivity levels.

Advantages of Full-Time Employment

• Commitment: Full-time workers may have more opportunities to demonstrate a more significant commitment to the company.
• Recruiting advantages: Full-time positions may be more attractive for those seeking career progression and development.
• Ease of scheduling: The employer may have fewer employees to manage if all team members work full-time schedules vs. employees working varying reduced schedules.

Disadvantages of Full-Time Employment

• Costs: Employers invest more financially in full-time workers' compensation premiums to cover additional hours and benefits, including overtime hours.
• Range of skills: Some highly skilled individuals may only want to work part-time, limiting company options.

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.

Comparing Productivity and Efficiency Between Part-Time vs. Full-Time Employees

You may wonder about the potential differences in productivity and efficiency between part-time and full-time workers. As you may expect, both types of employment offer advantages and disadvantages in these areas. Let's compare the two:

Part-time employees:

• Can help to bridge staffing or skills gaps.
• May experience increased energy with fewer hours, helping them become more productive at work.
• May encounter less stress due to fewer working hours, reducing burnout and increasing productivity.
• May offer cost savings to the employer, helping the business to be more cost-effective.
• May have limited engagement or commitment to the employer, causing high turnover and additional costs to the company.

Full-time employees:

• May experience less flexibility, making bridging staffing and skills gaps more challenging.
• May demonstrate increased loyalty and commitment because of full-time compensation and more comprehensive benefits packages, reducing turnover and potentially increasing productivity and efficiency.
• May experience higher job satisfaction, which boosts productivity.
• May face higher levels of burnout with more responsibility and less flexibility in full-time roles. This can impact an employee's productivity, efficiency, and effectiveness at work.

Making the Decision: Part-Time vs. Full-Time Employment

Whether you should hire part-time or full-time employees depends on your industry and your business. If you're a small business and unsure where to start, you may want to connect with your HR Professional to discuss which type of employee may work best for your business.

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.