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Are employers required to provide benefits to part-time employees?

Updated: August 12, 2022

By: Jon Davis

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Here’s some eye-popping data: more than half of the organizations that participated in a recent International Foundation for Benefits Plans survey say they offer part-time employees benefits, such as life insurance and access to retirement savings programs.

 

If part-timers are the backbone of your business this news may not necessarily be as surprising for you as it is for other business owners. But historically, enticing job candidates with these types of perks has been a strategy reserved for employers seeking to attract full-time talent.

 

So, what’s changing?

 

As competition for part-time labor continues heating up, companies that count on these types of workers are taking notice — and using the practice to their advantage. It’s part of a larger trend involving employers who use full-time benefits to attract part-time talent — a move that is also increasing productivity and preventing job-hopping.

 

“Part-time and contract workers have become an ever more significant (and mission-critical) segment of the regular workforce,” says Bill Catlette, an executive coach with Contented Cow Partners and former human resources director at FedEx. “Benefits experts are constantly seeking an effective (and affordable) mix of benefits that help their company do three things: Attract, retain, and motivate talent.”

 

And depending on where you do business, local or state laws may require you to provide part-time employees with certain types of coverage. With that said, let’s find out what you could be offering and some potential requirements.

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What’s considered a part-time employee?

In the simplest terms, part-time employees work fewer hours per week than individuals in full-time roles. That said, defining a part-time employee (and how many hours they work) can be a little tricky because there isn’t an official classification established by the federal government — or clear-cut guidelines for employers to follow. We can get closer to an actual figure by zeroing in on what some agencies — such as the Internal Revenue Service (IRS) and Department of Labor (DOL) — say on the subject:

 

  • The DOL defines a part-time employee as someone who works between one to 34 hours per week or less than 35 hours per week. But this is not a law.
  • The IRS defines a full-time employee as someone working more than 30 hours in a workweek or 130 hours per month. Uncle Sam usually defers to employers on what they consider part-time, which varies from business to business.
  • We should also point out that the Fair Labor and Standards Act (FLSA) doesn’t weigh in on the definition of part-time employees.
  • Last but not least, insurance companies usually have their own definitions specific to full-time employees for underwriting purposes. According to OnPay’s Vice President of Insurance, Paul Foery, “When it comes to insurance coverage, almost all carriers define a full-time employee as someone working 30 hours or more during a workweek.”

 

Based on all of this information, it’s probably fair to say that part-time employees work around 34 hours or less — and no more than 35 hours — in a workweek. And it’s common for part-time employees to work a minimum of 20 hours per week, depending on the needs of the business.

 

In addition to the bullet points listed above, you can use the table below for reference:

 

Source of definition Full-time Part-time
Department of Labor No official definition Employee working between one to 34 hours a week
IRS Employees working more than 30 hours in a week or 130 hours per month No official definition
Most insurance carriers Employee working more than 30 hours in a workweek No official definition

 

Now that we have some parameters to work with, let’s talk a bit more about part-time employees and their benefits eligibility.

Are part-time employees eligible to receive benefits?

Part-time employees could be eligible for benefits such as sick leave or short-term disability, depending on requirements where your business operates. But typically, you’re the boss when it comes to providing perks such as vision plans or holiday pay — and you’ll also set the rules on how employees earn them.

 

For instance, you could decide to offer only what your state mandates. Alternatively, you may want new hires to onboard for a certain amount of time — perhaps 60 to 90 days — before earning access to things like commuter benefits or paid time off.

 

As you’re making these decisions, it can be a good idea to spell it all out in your business’s employee handbook to keep everyone on the same page. For example, If you’re defining a part-time employee as someone who works less than 25 hours in a week and a full-timer as one who works more than 40 hours, add a section in your employee handbook that outlines how you define each, to eliminate any misunderstandings or questions about the policy.

 

That said, it’s fair to think about how offering benefits will move the needle — and prevent team members from jumping ship.

Does offering benefits to part-time employees help your bottom line?

Keeping a close eye on budgets is at the heart of most business decisions and it’s natural to wonder if offering part-time employees makes financial sense. According to Dannie Fountain, a senior staffing sourcer at Google with a Masters of Science in human resources management (and the founder of Focused on People), it pays to think about employee morale just as much as the dollars and cents:

  • When you identify benefits that are in alignment with part-time employees’ needs, it creates two outcomes: first, it shows that you as the employer value your entire team, even the employees working the least amount of time. This contributes to an overall positive work environment, employee engagement, and culture.
  • Second, part-time employees can sometimes have a higher “staffing cost” than full time (they work less hours, but it takes just as long to find replacements), so promoting retention and preventing turnover not only helps with business continuity but also keeps labor costs down — making benefits a “small price to pay” for overall organizational health.

Sometimes smaller gestures go a long way too. “Many perks don’t require a large capital investment from employers to make a lasting impression,” says Dr. Brandi Baldwin (PhD), CEO of Millenial Ventures. “Health and wellness app subscriptions, the ability to work remotely (if applicable), employee recognition, on-the-job mentorship, birthday gift cards, and access to professional development education can help employers both attract and retain high-quality part-timers.”

 

So providing perks can be a difference-maker for both your staff and bank account. But it can be a little overwhelming when weighing which benefits to offer — or what might be required — so let’s start with a few questions business owners usually ask about benefits that may be statutory in your state.

Are part-time employees eligible to receive workers’ comp?

Chances are part-time staffers are eligible for workers’ compensation since almost all states require that it be provided by employers. Offering this policy also provides peace of mind: if someone gets injured or sick while on the clock, it protects both you and the employee by covering costs associated with medical care and rehabilitation.

 

It’s important to understand that you have two options on this front as an employer. There is traditional insurance and also pay-as-you-go workers’ compensation. For a pay-as-you-go plan, the fees are based on your payroll and automatically updated as employee levels fluctuate — instead of an upfront, lump-sum payment once a year.

Do part-time employees receive paid sick leave benefits?

Most state and local laws have rules for employers to extend part-time employees’ paid sick leave. Usually, part-time staffers will need to put in a minimum number of hours to be eligible for this benefit. Most of the time, hours are set fairly low so employees can work enough to receive the coverage.

Can a part-time employee receive short-term disability?

The short answer is yes, they can. And employers can offer short-term disability to their part-timers on either a fully contributory, partially contributory, or noncontributory basis. It’s a good idea to do your homework as some states mandate coverage, such as California, Hawaii, New Jersey, New York, and Rhode Island. Puerto Rico also mandates coverage. And it doesn’t matter if employees are part-time or full-time in those regions — coverage is required.

Do part-time employees receive unemployment benefits?

It’s never a fun part of being a business owner, but if there ever comes a time when layoffs are unavoidable, part-time employees could be eligible for unemployment. It all depends on your state’s rules, how many hours an employee has worked within a specific period of time, and the compensation they’ve earned. OnPay’s state-by-state unemployment guide breaks down all of the important details employers should know. This guide can also be a helpful reference for employees who need to file a claim.

 

The benefits mentioned above can play a big part in protecting part-time employees while keeping your business compliant. Now, let’s shift gears slightly and discuss some of the benefits that can make a big difference when recruiting job candidates and encouraging your top contributors to stay over the long run.

Benefits part-time employees will love

PTO and vacation time

Most people appreciate a breather every now and then. Offering paid time off can help your team rest and recharge, which in turn translates into increased productivity and happier employees.

 

Work from home (WFH) 

59% of US workers spend more time working from home than in the office. Though it might not make the most sense for retail personnel or those who work behind a register, it can be a nice perk for part-time employees who can do their jobs outside of the workplace.

 

Health benefits

According to healthcare.gov, employers don’t have to offer part-time employees health insurance (even if you offer your full-time staff these benefits). However, providing access for part-time workers could help prevent them from looking elsewhere to see if the grass is greener with another employer. Before extending any kind of health benefits, call your insurance carrier to find out whether they have rules about eligibility or coverage for part-time workers.

 

For example, many health insurance providers have underwriting guidelines which prevent offering major medical benefits to part-time personnel. This is often because of variables such as cost and a carrier’s comfort level. As a result, many will not underwrite a policy for employees who work less than 30 hours a week.

 

Telemedicine may offer lower-costs — and be a more realistic option — if you want to provide health benefits. Doctors are usually available for video or voice calls –and in many cases employees can avoid a costly visit to the emergency room since MDs can help with many things virtually.

 

Some plans may even cost as little as $20 per month, per employee — comparable to the cost of adding another staffer to the payroll.

 

Life insurance
Another benefit that can make a lasting impression on potential employees is life insurance. This type of coverage pays the families of an employee a sum of money in the event the employee passes away.

 

Education and tuition reimbursement
If you have part-time employees eager to return to the classroom — or you’re encouraging them to grow their skill set — you could consider tuition reimbursement benefits.

 

Funding a portion of an employee’s education can pay off in many ways for you as the employer. It can be a way of exhibiting your company’s confidence in a person’s potential and also help you to discover the leaders within your organization — instead of relying solely on external recruiting.

 

Commuter benefits
If you have team members who rely upon public transportation to get to work, providing commuter benefits as a pre-tax way to pay for travel might make trekking to and from the workplace more enjoyable (and at minimum, make an impact on your employee’s pocketbook.)

In most cases, train, subway and bus fare are eligible for this type of program. What’s more, for those employees who want to drive, parking fees might also be eligible for coverage. Some states such as New Jersey and New York – and many larger cities – even have mandated commuter benefits programs.

 

 

Employees appreciate benefits in a workplace

 

Low cost fringe benefits
From concert tickets to gift cards, there are low-cost incentives that can make an employee’s day — keeping them happy for the long haul. Just remember that some fringe benefits are taxable and need to be properly accounted for on employee pay stubs.

 

Retirement plan access
According to our 2020 survey data, access to retirement savings programs, such as a 401(k) appear at the top of employee wishlists. And if your part-time team is among the 49% of adults without any savings, they’ll likely appreciate you helping them contribute to the long-term prospects of their retirement nest egg.

 

There’s also legislation picking up steam to make it easier for people to sock away money for post-work life. Here are some of the most notable measures:

 

  1. Employment Retirement Income Security ACT If you decide to offer part-time employees access to a qualified retirement plan — either state-run or through a private provider — remember that eligibility must  comply with the Employee Retirement Income Security Act (ERISA) and what’s referred to as the “1,000-hour rule.”To summarize, this rule states that employees who have completed 1,000 hours of work in a 12-month period are eligible to participate in any retirement plan that is offered to other employees.
  2. SECURE Act In a nutshell, the SECURE act changed eligibility requirements surrounding the participation of part-time employees in 401(k) plans. The SECURE Act includes a provision requiring employers to offer 401(k) plan participation for long-term, part-time employees. These staffers must work at least 500 hours per year for a period of three years to be considered eligible. Hours were required to start being counted on January 1, 2021, and the first year a part-time, long-term employee would be eligible to participate in the retirement program is January 2024.
  3. State-by-state Throughout the country, state-mandated retirement plans are becoming more commonplace. For example, in California and Oregon, employers must provide employees access to a retirement savings plan — whether private or state-sponsored — and there’s no distinguishing between full or part-time. Most states adopting these types of programs want access made available for all workers.Prior to the mandate, most plans did not account for part-time employees, so it pays to research whether your state’s website lists specific requirements.

The big picture

Even though they’re working fewer hours, part-time employees can still make a big difference to your company’s success — including its productivity and bottom line. And you never know: the part-timer employees that you bring onboard today could be your full-time superstars of tomorrow.

 

Benefits are yet another tool that, when used effectively, can attract the best and brightest to your company — and encourage them to stick around to contribute to your company’s long-term growth.

 

This article is for informational purposes only and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors for formal consultation.

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Jon Davis is the Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.