Do Part-Time Employees Get Benefits?

Only 70% of the amount private employers pay in compensation to workers goes for wages and salaries. Almost 30% of employers’ compensation costs are used to pay for employee benefits. Small and mid-sized business owners and managers should have a good understanding of how these benefits work. One question that often arises is, “Do part-time employees get benefits?”

To understand who receives benefits, you first need to distinguish between employees and contingent workers. Employees are on the employers’ payroll and have access to employee benefits. Contingent workers include freelancers, independent contractors and consultants. They are neither on the payroll nor eligible for employee benefits.

All employees, including full-time, part-time, seasonal and/or temporary, have certain legal rights and protections that contingent workers do not. Many employees and employers, however, are unsure about whether part-time workers should or might be entitled to benefits. Are the benefits required by law, or should employers consider offering them voluntarily? This article will explore these questions as they relate to health insurance and benefits for part-time, temporary and seasonal employees.

Benefits you may need or want to offer non-full-time employees

Non-full-time employees have certain rights and protections under federal, local and/or state employment laws. Employers must know which benefits are legally required in their locations and which might be wise to provide. For example:

Workers' compensation insurance. Most employers are required to carry workers' compensation insurance. That covers medical costs and provides partial wage replacement for any worker injured on the job.

Paid and unpaid time off. Various federal, state and local laws govern time off for family leave. Whether time off must be paid, or an employee's eligible for family leave, depends on your location.

Some other types of time off, such as sick leave, are required in some states. No state currently requires paid vacation. But even if you're not required to provide paid time off for non-full-time employees, it could be worth offering it to attract and retain good employees. Similarly, you might consider providing fringe benefits, such as tuition assistance, that may be attractive to your employees.

Unemployment benefits. The rules for when part-time, seasonal or temporary workers are eligible for unemployment benefits vary by state. As an employer, you should be aware of your state’s requirements.

Overtime pay. If employees are non-exempt, you must pay them overtime if they work more than 40 hours in a given week. That includes both part-time and temporary workers.

Retirement plan and disability insurance. Some states require that employers provide one or the other or both. But most do not, even for full-time employees.

One of the most sought-after employee benefits is health insurance. Here’s what employers need to know about health insurance for non-full-time workers.

Part-time benefits and employees

There is no single definition of part-time employment that everyone agrees on. There are, however, various definitions that affect legal requirements. According to the Affordable Care Act (ACA), employees are considered in a part-time job if they average 29 or fewer hours of work per week or fewer than 130 hours in the month.

What are the rules for part-time employee health insurance?

Both the ACA and your insurance carrier will have rules about providing health insurance for non-full-time workers.

Which employers are covered by the ACA?

The ACA applies to "applicable large employers" (ALEs) with an average of 50 full-time employees (FTEs). FTEs are those working at least 30 hours per week on average or at least 130 hours for the month. The hours that part-time employees work can be combined to create full-time equivalents. Those equivalents can then be counted in the total used to determine if an employer is an ALE. However, hours worked by seasonal employees may not count in that calculation, according to a complex set of rules.

ACA rules for part-time employees

The ACA requires ALEs to offer health insurance to their full-time workers. Employers are not required to provide health benefits to part-time employees. However, you can voluntarily provide those benefits. If you do, you must consistently offer health benefits to all similarly situated employees.

Insurance carrier rules for part-time employees

Before you decide to roll out a part-time employee benefits package, check with your insurance carrier. Carriers define their own rules. Some have written policies that specifically allow or prohibit offering health insurance to part-time staff.

Most health insurance carriers have minimum participation requirements. (Some states have these rules too.) Of all the employees who are eligible for your health plan, a minimum percentage of them must purchase and use it. Making the plan available to part-timers could affect your participation rates.

Temporary employees and benefits

Temporary employees work for a limited time. They can be employees who either work directly for you or who come from a staffing agency. Workers from agencies are employees of the agencies, and you are not responsible for their benefits. You may, however, be required to provide health insurance in some circumstances to temporary employees who are on your payroll.

Can you offer temporary-employee health insurance?

If you have a temporary worker who is working for you full-time, and you are an ALE required by the ACA to offer insurance to your full-time employees, you may be required to offer insurance to the temporary workers. Some state laws may also require you to offer them health insurance.

Even if you aren't required to offer health insurance to temporary employees, you can do so to attract and retain good workers.

Seasonal employees and benefits

A seasonal employee is hired into a position for six months or less around the same time of the year, such as summer or winter.

How many hours can seasonal employees work before needing health insurance?

If you are an ALE, and you have seasonal employees working at least 30 hours a week (or 130 hours a month), do you have to offer them medical coverage? The answer is that it depends. The ACA does not exclude seasonal employees from the employer-shared responsibility rule, so you might have to provide them with medical coverage. But it gets more complicated than that.

The IRS allows you to choose from two measurement methods — monthly measurement and look-back measurement — to determine whether an employee is considered full-time and therefore must be offered health coverage.

With the monthly measurement method, you assess their full-time status every month. This measurement may be difficult to use for workers who are seasonal or who work variable hours. It could also cause them to gain or lose coverage from one month to the next.

The look-back measurement method provides an optional alternative. It determines an employee’s eligibility for health coverage based on their average number of hours worked during a past period of time. In general, the method a company chooses must be used for all of its employees.

Pros and cons of offering health insurance to part-time and temporary employees

For many small businesses, offering benefits for non-full-timers seems like an unnecessary and burdensome expense. However, there are important advantages that shouldn't be overlooked.

Perhaps the biggest advantage to your company is that you’ll be better able to attract well-qualified employees. Many workers say that a lack of health benefits is a deal breaker when deciding whether to accept a job offer. Some even say they are willing to take a smaller salary to get better health benefits.

You’re also more likely to retain your employees. This will lower recruiting and training costs, which can be very expensive.

There are several other advantages to providing health insurance to employees:

Better health. When employees have access to medical care, they are less likely to get sick and more likely to get treatment. The result can be better job performance and less time lost to being out sick.

Improved financial security. An unexpected and expensive health problem can burden an employee with debt. It also creates stress that can impact their job performance and even their ability to continue working for you.

Tax benefits. There are several:

• Premiums and other expenses you pay for your employees’ health insurance are generally tax deductible.
• The Small Business Healthcare Tax Credit is available to employers who meet certain conditions. They must have fewer than 25 FTEs and pay an average employee salary of $56,000 per year or less. This credit could be worth up to 50% of the costs you pay for your employees’ premiums. The smaller your business, the larger the credit. Seasonal workers are not included in the credit unless they work for more than 120 days during the tax year.
• You can also set up a system whereby employees pay their share of their health care premiums with pre-tax dollars.

To decide whether to offer health insurance to part-time and temporary employees, you’ll need to do a cost/benefit analysis. How much will it cost to provide health insurance for your non-full-time employees? How much of a tax break will you receive? Can you estimate the value of retaining those employees versus losing them to a company that provides better benefits? What about the value of a healthy workforce?

Other types of health-related insurance for part-time, seasonal and temporary employees

Although not required, providing extra health-related insurance benefits could help your company attract and retain part-time employees. Consider these other benefits as well:

• Dental insurance.
• Vision insurance.
• Flexible spending accounts (FSAs).
• Health savings accounts (HSAs).
• Hospital insurance.
• Life insurance.

Some employee benefits are required for part-time, seasonal, variable-hours and/or temporary employees. Others are optional but can be worthwhile for you to provide if the advantages outweigh the costs.

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