The Requirements of Offering Part-Time Employee Benefits

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A frequent question that both employees and employers have is about the legal requirements surrounding part-time employee benefits. While it may seem as simple as determining the number of hours worked or the type of job held, the determination of eligibility for part-time benefits is a very complex matter.

What the Affordable Care Act Says

The Affordable Care Act (ACA), also known as "Obamacare," mandates that employers offer group health insurance benefits to full time or the equivalent employees, and at least 95% of their workers, so this leaves things to their discretion for the remaining percentage. Additionally, state laws, eligibility for other types of benefits, industry norms, and even the salary paid to employees can have an impact on the degree to which employers are required to cover their employees’ health and wellness needs.

Full Time vs. Part-Time Employee Definitions

The Fair Labor Standards Act (FLSA), which dictates federal wage-and-hour laws around the nation, does not define part-time or full-time hours, but it does define overtime hours as being over 40 hours per pay period (on a weekly pay schedule). The US Bureau of Labor Statistics defines part-time employees as people who work fewer than 35 hours a week, so anything over 35 would be considered full-time. Current ACA guidelines state that employers who have 50 or more full-time or equivalent employees must provide Affordable Health Care coverage as part of employer shared responsibility provisions. For the purpose of these provisions, a full-time employee is defined as someone who is working at least 30 hours each week or 130 hours per month. Employees who work fewer hours are considered part-time under ACA laws.

Safe Harbor Laws

To avoid paying for health insurance, some larger employers try to maintain their part-time workforce under 27 hours per week also known as a “safe harbor.” It reduces their risk of having to pay for health insurance benefits and or overtime payment. However, the law is continually changing, so this practice may be eliminated in the near future.

Employer Responsibility

Under Obamacare, covered employers must report all of their part-time and full-time workers to determine if any of the part-time employees also qualify for benefits. It can be based on the average hours they work each year. Keep in mind that part-time employees are often asked to work more hours during peak production cycles and busy seasons, and this can put them just over the limits for the year.

It's also important to understand that while an employer may decide whether or not to offer group health benefits to part-time employees, many plan administrators have health care options for employees who work as few as 20 hours in a pay period. It can be beneficial to offer them low-cost benefits under group rates.

Requirements for Part-Time Employee Benefits

Now for the legal part. While standard health care insurance and supplemental benefits may be at the sole discretion of company HR directors, some employee benefits are mandatory for all employees regardless of the number of hours worked. Under the Employee Retirement Income Security Act (ERISA), any employer that offers a qualified retirement savings plan to employees has to also offer them to full-time and part-time employees.

The FLSA also requires the payment of overtime at the same rate that full-time workers earn it. Unemployment benefits are available to both full-time and part-time employees when they separate from employment. Workers' compensation benefits and injury claims must be handled in the same way for part-time and full-time employees. There are also a number of other benefits that are widely offered to part-time and full-time employees such as on-the-job training, paid time off, and corporate wellness services that all employees can benefit from.

Why Offer Benefits

While it may not be legally required to offer all benefits to part-time employees, unless they fall under the above rules—it can be a positive business practice to offer benefits to part-time employees. It can be a great way to boost recruitment efforts when other employers are not offering benefits to part-timers. It can also support employee productivity and retention because employees will remain loyal to an employer offering benefits and protecting their health.

Employers can still maintain some control over the types of group health plans they offer, including supplemental insurance like dental, life, and disability benefits. However, when a company offers an affordable benefits package for part-time employees, it sends the message that the health and well-being of all employees is a number one priority.

How Part-Time Employees View Benefits

Part-time employees most often view benefits as valuable perks, especially if they are working other jobs and cannot afford to purchase insurance through other means. They have the same, if not more responsibilities than full-time employees, often juggling raising a family or going to school with that of a job. It’s beneficial for the business too.

Consider if a part-time employee has access to paid time off versus calling out sick to deal with a personal matter. This way, the workplace is not impacted if the employee can schedule time off in advance.

Part-time benefits are flexible and can be offered to employees who complete a certain amount of time on the job, so long as this is managed fairly across the entire employee population.

Managing Benefits Costs

The cost factor of offering part-time employee benefits must be determined when choosing group plans, but most plan administrators have reasonable options. Many of the benefits, such as voluntary plans and supplemental insurance, can be offered as full employee-paid or at a half rate of full-time employee plans.

Using a combination of a high deductible health care plan with a flexible spending account or health savings account can help part-time employees put more pre-tax dollars away for paying off larger medical bills and paying for prescriptions and other things not covered. Employers can also get creative and reach out to local health and wellness vendors to arrange for corporate discounts on food, medicine, and wellness services that help all employees stretch their dollars even further. As mentioned previously, delaying the eligibility of benefits to the first 30 days on the job can also reduce costs for employers, and give employees a chance to prove their worth before the investment is made.

Before the organization decides against offering part-time employee benefits, consider the impact of not offering them. Employee retention, productivity, and a more engaged workforce are all win-win situations for your company.