- Typically, the number of hours an employee works each week and their weekly work schedule can help you distinguish between full-time and part-time status.
- Full-time employees can offer your business security in scheduling, regularity in product or service flow, and overall consistency for your labor management.
- Part-time employees can save your company money because you won’t have to pay as much when there are dips in workflow, or offer healthcare and other benefits.
- This article is for small business owners who need to hire staff and are deciding between full-time and part-time employees.
Many small business owners struggle with the question of whether to hire all full-time employees, all part-time staff or a combination of both. Some employers need more part-time staff to remain flexible for fluctuating needs, while others require a more consistent and predictable workforce.
Before you hire staff, it is important to know the pros and cons of each type of hire and how federal laws may affect your decision. There are also many other factors to consider, including when the Affordable Care Act (ACA) mandates healthcare coverage and how overtime works.
Part-time vs. full-time employees
Many employers use both part-time and full-time employees in accordance with their business’s needs. While there are pros and cons of each employment option, the final decision comes down to your company’s specific requirements.
Technically, there are no federal laws or regulations that fully define full- or part-time employment. Instead, Fair Labor Standards Act (FLSA) regulations and ACA benefit requirements can help employers discern the difference.
In general, part-time employees work fewer cumulative hours than full-time employees. However, this may change in a busy week or season, such as over the holidays.
Part-time employees typically work fewer than 40 hours a week, although there are numerous exceptions to this generalization. The FLSA does not outline in any further details about what “part-time” is.
The ACA requires employers to provide healthcare benefits to their employees for 30 or more regularly worked hours within a workweek, so the ACA considers fewer than 30 hours a week to be part-time.
Although most employers consider 40 hours in a workweek to be full-time employment, many use 32 hours as the minimum for full-time status, which is important in determining who is eligible for paid time off, paid holidays, retirement plans and so on. Working 40 hours per week typically gets employees to around 2,080 hours in a year (40 hours per week multiplied by 52 weeks).
Overtime laws for part-time and full-time employees
Whether your employees are eligible for overtime pay may play into your definition of full-time vs. part-time employee. Employees whose jobs are governed by the FLSA are either exempt or nonexempt. Nonexempt employees are entitled to overtime pay; exempt employees are not. The majority of employees covered by the FLSA are nonexempt. [Read related article: Exempt vs. Nonexempt: What’s the Difference?]
For the most part, the FLSA requires overtime pay of 1.5 times the employee’s regular pay rate for nonexempt employees who have worked more than 40 hours in a standard workweek (not a pay period). However, overtime laws differ somewhat from state to state.
Key takeaway: Whether you need full- or part-time employees depends on your business’s specific needs, but be mindful of employment laws, such as those concerning overtime and ACA eligibility for employees based on their hours.
Pros and cons of hiring full-time and part-time employees
There are both pros and cons of hiring full-time employees, and the same is true for part-time workers. In the end, your staffing and overall business needs will truly drive your decision.
In general, staffing levels are more flexible with part-time employees who don’t have guaranteed hours or benefits, compared with full-time employees who expect a similar schedule and number of hours each pay period, as well as vacation time and healthcare benefits.
Here are some of the pros and cons of each employee type.
Pros of hiring part-time employees
- Lower overhead costs: It’s less expensive to have part-time staff; full-time employees often require higher salaries and employee benefits.
- Flexibility: Hiring part-time workers allows for more nimble staffing for fluctuating scheduling needs.
- Extra support: Having part-time employees permits easier overflow or additional staffing when you need it (either week to week or seasonally).
- Cross-training: You can develop experienced backup team members (and cross-trained team members) to cover shifts and projects when needed.
- Balanced employees: In some cases, a part-time schedule allows your loyal team members to work other jobs, go to school or attend to family responsibilities. This is why a large portion of employees choose to work part time.
Cons of hiring part-time employees
- Inconsistency: Inconsistent scheduling sometimes makes it hard to retain employees, especially those who need steady hours.
- Potential inefficiency: Part-time employees who work only occasionally may have higher error rates resulting from a lack of consistent repetition.
- Outside employment challenges: When you hire part-time workers, you may have to deal with co-employment issues. There’s always the chance that your company is the “side gig” that an employee doesn’t value as much as their other job. For example, when an employee has more than one job, they may have to decide which takes priority if they are double-booked for a shift.
Pros of hiring full-time employees
- Better planning: You’ll enjoy consistency in scheduling and be better able to plan for goals, projects and workloads.
- Cost savings: The more benefits-eligible employees you have, the more cost-effective they can be for your company. Large benefits-eligible groups (or companies) tend to yield cost savings (per capita) for the employer in the healthcare benefits area.
- Consistency: You’ll see more consistent productivity because employees will spend more time working in their roles and partnering with other full-time team members.
- Employee loyalty: Employees tend to feel more tied to their company’s brand when they work consistently for the company.
Cons of hiring full-time employees
- Overstaffing concerns: Full-time employees might not be cost-effective when workload dips and productivity and/or output drops.
- Higher employee stress: Full-time employees manage more work-related stress concerning deadlines and project goals. Employers care about this not only for the well-being of their team members but also because there is a strong inverse relationship between employee stress and productivity, according to a 2021 study in the Kansas Journal of Medicine.
- Benefits-related costs: Fringe benefits are a significant expense, which compounds as you hire more full-time employees.
- Employee relations: At times, employers must manage attendance and performance issues resulting from employee burnout and poor work-life balance.
Key takeaway: Both part-time and full-time employment have advantages and disadvantages. Part-time employees offer flexibility and potential cost savings, and full-time employees provide more consistent staffing and support for your business needs.
Payroll and taxes for full-time and part-time employees
Employers must withhold federal and state taxes from employees’ paychecks for all taxable compensation. Whether your employees work part time or full time, you must execute your payroll tax obligations consistently. These are some examples of payroll taxes:
- Income tax: There are both federal and state income taxes. Although everyone pays federal income tax, the following states do not collect state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming, according to TurboTax. In addition, New Hampshire taxes only interest and dividend income, not wages. Employers in other states must withhold state tax from wages paid for work done in that state. A few cities, such as New York City and Philadelphia, also have city income taxes that employers must withhold from paychecks. This tax is paid exclusively by employees. Each employee’s Form W-4 outlines their income tax withholdings.FICA: Federal Insurance Contributions Act (FICA) tax, which is a combination of Social Security and Medicare taxes, is paid equally by employers and employees. (Self-employed people must pay both portions. Learn more in our guide to freelance taxes.) The Social Security portion has its own name – Old Age, Survivors, and Disability Insurance – and provides benefits to eligible parties. The Medicare portion of FICA permits those age 65 and older to qualify for Part A Medicare coverage, as well as Parts B, C and D (though they carry additional costs).
- Unemployment: Federal unemployment tax is paid exclusively by employers, under the Federal Unemployment Tax Act, to protect employees who are laid off. State unemployment tax is paid by employers, although a few states require some employee contributions.
Regardless of their size and type, all employers deduct payroll taxes for their W-2 employees. Most employers in the U.S. outsource their payroll needs, which makes these taxes, as well as the payroll process in general, relatively easy to handle. Check out our picks for the best payroll services to learn more about outsourcing your payroll.
Bottom line on full-time vs. part-time workers
Whether you utilize full-time and/or part-time employees depends on your business’s needs at any given time. You should reevaluate your balance between these staffing options at least once a year to ensure your business’s needs are being met.