Navigating Benefits

Part-Time Employee Benefits: Are They a Legal Requirement?

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Posted by January 17, 2017

Both employees and employers are often confused about the legal requirements surrounding part-time employee benefits. It’s not always as simple as the number of hours worked or the type of job held. Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees are only required to offer group health insurance coverage to 95 percent of their workforce, leaving the benefits for the remaining 5 percent up to their discretion. Federal and individual state laws, industry norms, Medicare eligibility and the types of benefits your company offers all play a role in determining which benefits you must provide for your part-time employees.

The Legal Definition of “Part-time Employee”

One reason why part-time employee benefits can be so confusing is because there is no clear definition of what it means to be a “part-time employee.” The U.S. Bureau of Labor Statistics describes part-time employees as individuals who work between one and 34 hours each week. The Fair Labor Standards Act (FLSA), which outlines federal wage and overtime laws, surprisingly fails to define either part-time or full-time hours, but it does define overtime as being any hours worked over 40 hours in a single workweek.

According to ACA guidelines, employers who have 50 or more full-time equivalent employees must provide their full-time employees with access to minimum affordable health care coverage. The ACA defines full-time employees as those who work an average of 30 hours each week (or 130 hours per month). Workers who work fewer hours are considered part-time employees. Unfortunately, this has caused some employers to try to avoid ACA mandates by keeping workers under 27 hours per week, a so-called “safe harbor” to reduce the risk of overtime.

It’s important to note that employers must report all their workers (both part-time and full-time employees) to determine if part-time employees qualify for benefits based on the average number of hours they work each year. Part-time employees may be required to work more hours during peak seasons, which can put them over annual limits. Group health benefit administrators may offer plans with eligibility for employees who work as little as 20 hours per week.

Required Benefits for Part-time Employees

While some part-time employee benefits and hours may be at the discretion of employers, there are some benefits that are mandatory for all employees. For example, state unemployment benefits are available for both part-time and full-time employees upon termination of employment. Under the Employee Retirement Income Security Act (ERISA), employers who offer qualified retirement savings plans for full-time employees may also have to offer them to part-time employees. FLSA law also requires that part-time employees receive the same rate of overtime pay as full-time workers—at least one and one-half times the regular rate of pay for every hour worked after 40 hours in a single workweek.

Whether part-time employees can take advantage of other benefits, such as paid time off, education and training programs and wellness programs, is up to each individual employer, but there are good reasons why you should consider extending these benefits to your part-time workers.

Part-time Employee Benefits Best Practices

Employers still maintain control over whether they offer health insurance, life insurance, dental and vision insurance and other types of supplementary benefits to their part-time employees. Often this comes down to choosing to develop a strong compensation and benefits plan that puts employee well-being and retention ahead of profits. Even if you are not legally required to offer certain benefits to your part-time employees, the investment can be worthwhile as it can improve employee engagement and wellness. Part-time employees will value any benefits you are able to offer, which can support recruitment efforts too. Most of the time, these benefits can be provided at the same group rate enjoyed by full-time employees, and some small businesses that provide health and wellness benefits may be eligible for tax credits and other incentives.

When deciding whether to offer part-time employee benefits, it’s important to consider the cost of not offering them. Part-time employees are often trying to balance work and personal responsibilities, so flexible work hours and paid time off are valuable to them. If part-time employees have no access to PTO, they may call out sick rather than scheduling time off and this can lead to lost work hours and create staffing and scheduling headaches.

Part-time employees are just as susceptible to illness as full-time workers. They also face the same financial challenges as full-time employees when it comes to handling household and medical expenses and planning for retirement, even if they are already drawing partial Medicare benefits. Providing useful benefits that help your employees face these challenges shows your workers that you value their contributions and can raise morale and increase retention.

When part-time employees feel supported by their employer, they are much happier and more productive. It’s a win-win for everyone.

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