Published on: March 6, 2020 Last modified: April 28, 2020

Full-Time vs Part-Time Employees: What’s Really the Difference?

Table of Contents
    Add a header to begin generating the table of contents

    The United States jobs market is booming. The unemployment rate is at 50-year lows. Both minorities and women are benefitting from the boom.

    However, the labor participation rate sits at 63.4%. Millions of workers are inactive and not considered in the unemployment rate calculation.

    There are also many Americans working part-time jobs. Employers have to make an operational decision about whether to hire part or full-time workers.

    Tax Education part time vs full time

    Read on to learn about part time vs full time. Explore the differences between the two employment types from an employer’s perspective. Dive into topics such as taxes and employee benefits.

    Employment Statistics

    Let’s start off with statistics showing the difference between part and full time. There are roughly 160 million workers that are part of the U.S. economy.

    The vast majority of those workers are considered full-time. By the government’s definition, this means they are working more than 30 hours per week on average.

    Of the 160 million workers in the country, nearly 27 million are considered part-time. Most are classified as part-time for noneconomic reasons.

    Employer Shared Responsibility

    Shared responsibility is one of the main reasons why the part or full-time determination is so important. The Affordable Care Act (ACA) passed by the Obama Administration established the shared responsibility standard.

    Under the ACA, employers are required to provide health care coverage for their employees. If the company does not have a health care plan, it can instead make a shared responsibility payment to the IRS.

    The health care plan needs to meet the government’s definition of affordable and minimum value. This is often referred to as minimum essential coverage.

    The Internal Revenue Service (IRS) also imposes informational reporting requirements for health care coverage. This is the government’s mechanism of making sure you comply with the ACA’s quality standards.

    Only applicable large employers (ALE) need to comply with the ACA. The IRS defines ALE as a business with at least 50 full-time equivalent employees in the preceding tax year.

    Definition of Full-Time

    The definition of the full-time employee remains an open debate. Society has traditionally defined full-time as a 40-hour workweek. However, there are different standards held by businesses, states, or even federal agencies.

    The United States Bureau of Labor Statistics considers full-time as 35 hours per week. This metric is used for statistical purposes only and has no legal bearing.

    For the purposes of the ACA, the IRS defines full-time as someone who works an average of 30 hours per week. On a monthly basis, this person works 130 hours or more on average.

    The federal law that regulates the American workforce is the Fair Labor Standards Act (FLSA). However, the FLSA does not weigh in on the part vs full-time debate.

    Due to the vagueness of the FLSA, some companies take the liberty to define part and full-time work. Lastly, the state that you reside in may have laws on the books defining full-time work.

    Benefits of Full-Time Work

    The distinction between part and full-time is important for employee benefits. Besides health care, your employer is under no obligation to provide benefits like dental or a retirement plan.

    If the employer classifies an employee as part-time, that could yield cost savings. The employer can implement a business policy that part-time employees do not get access to benefits. This means they do not have to contribute to life insurance or a 401(k) match.

    Another benefit routinely withheld from part-time employees is Paid Time Off (PTO). Many companies choose to award PTO to full-time employees only.

    Overtime Rules

    Full-time classification also has an impact on whether you get overtime pay or not. The FLSA requires overtime pay for any employee who puts in more than 40 hours per week. During overtime hours, the employer is required to pay one and one-half times rate for any hours over 40.

    Obviously, part-time workers are not going to have many opportunities for overtime. As long as part-timers are nonexempt, however, they still should receive overtime if they work more than 40 hours.

    There are some exemptions for full-time workers. For example, certain salaried workers may not receive overtime pay. Salaried workers are exempted from overtime rules by the federal government.

    Taxes

    Employers need to withhold federal and state tax regardless if an employee is full or part-time. Of course, the payroll needs to withhold income taxes based on an employee’s IRS form W-4 or state paperwork.

    Tax Education part time vs full time

    In addition, an employer needs to withhold some earnings in accordance with the Federal Insurance Contributions Act (FICA). This is the employee’s contribution to Medicare and Social Security.

    For Social Security, both employee and employer contribute 6.2% each. Medicare requires 1.45% from each party.

    There are other payroll deductions as well derived from state programs. A common example is the unemployment insurance tax. This is a social assistance program that helps individuals who are fired or let go from their job.

    Pros and Cons of Part-Time Employees

    Given that many rules and regulations are the same for part and full-time workers, some employers question the benefits. There are some clear advantages to hiring part-timers.

    For example, full-time employees are looking for stability and long-term commitment. Hiring a part-time worker gives management more flexibility to terminate the position if necessary. Bringing in part-time help is a great way to relieve a temporary surge in work demand.

    As mentioned earlier, part-time workers are cheaper. The business can reduce labor expenses without a commitment to benefits or PTO.

    There are some cons to hiring part-timers. Employers are less likely to invest in training for a potentially temporary resource. At the same time, the employee is less committed to the organization without long-term stability.

    A Recap of Part Time vs Full Time Employment

    Very few employment situations are the same. Most businesses strive to find the right balance between part and full-time workers.

    It is difficult to find that balance without knowing the difference between the two. For instance, employers need to provide health insurance if their employees work more than 30 hours per week. If you have more questions about part time vs full-time employment, contact us today for assistance.

    Share The Knowledge! 😊

    Share on linkedin
    LinkedIn
    Share on twitter
    Twitter
    Share on facebook
    Facebook
    Share on reddit
    Reddit
    Share on whatsapp
    WhatsApp
    Share on email
    Email
    Share on print
    Print

    Get More Knowledge

    Ready to secure your financial future? Subscribe Today For Tax Knowledge Tomorrow

    JOIN 2,000+ OTHERS. YES, IT’S COMPLETELY FREE. ZERO SPAM, UNSUBSCRIBE AT ANY TIME.

    How Can we help?

    Don’t worry, our consultations are 100% Confidential & 100% Free