Part-time employee benefits: A guide for employers

Navigating the web of employee benefits is hard enough when your staff is full time. You need to sort out what’s mandatory, what’s a perk, and which benefits will set you apart from competitors to attract and retain the best talent.

Benefits can be even harder to navigate when you’re dealing with part-time employees clocking 10, 20, or even 30 hours per week. These employees may be vital to your operations, but that doesn’t mean you can, or should, offer the same package.

While full-time benefits are governed by local, state, and federal rules outlining what’s required of employers, benefits for part-time employees are governed by a confusing patchwork of regulations and legislation. And a lot of what you offer part-timers is simply up to you.

In this article, we’ll aim to demystify some of that confusion, exploring which benefits part-time employees are eligible for. 

What is considered part-time employment?

There is no hard and fast rule defining part-time employment, but generally speaking, any employee who works less than full time can be considered part time. The US Bureau of Labor Statistics considers anyone who works between one and 34 hours per week to be part time. And though part-time work is not explicitly defined in the Fair Labor Standards Act, the IRS considers anyone working for more than 30 hours per week or 130 hours per month to be full time for purposes of enforcing health insurance provisions of the Affordable Care Act. 

Are part-time employees entitled to benefits?

Part-time employees are entitled to some benefits, but the exact requirements vary by state and locality. Generally, states will pay unemployment benefits to part-time workers who are out of work for no fault of their own, and part-timers are generally covered under workers’ compensation policies. Federal rules require you to pay overtime, and to offer part-time staff over 21 the chance to opt into your company retirement plan after they work a certain number of hours per year. And depending on how many people your business employs and how many hours your part-time employees work per week, you may be required to offer health insurance (more on that below).

Should I offer benefits to part-time employees?

As mentioned above, some benefits may be required for part-time employees, depending on how many hours they work, how long they’ve worked for you, and your state and local regulations. But other than that, it’s largely up to you. You’ll need to weigh whether the advantages of offering them outweigh the time, cost and effort. 

It’s worth noting that technology is available to minimize the burden. Some HR platforms like Rippling allow you to administer benefits to part-time employees seamlessly alongside your full-time workforce.

Advantages of part-time employee benefits

Offering benefits to part-time employees can motivate staff and help your business attract talent in a competitive job market. Here are three reasons why you might want to offer them:

Attracting and retaining talent

Offering a benefits package to part-timers may help you attract qualified talent, especially if doing so helps you stand out from competitors who don’t offer benefits, or whose benefits are less appealing. Workers may also be more likely to stick around and work harder while they’re on your payroll if they know they’re getting more in return. 

Enhancing your company’s reputation

People pay attention to how companies treat their employees, and offering a quality benefits package is one of the clearest signals you can send that you value your workforce. It could trigger a virtuous cycle—word spreads, your brand reputation improves, and you continue to attract higher quality employees as your company becomes known as a desirable place to work.

Reducing turnover costs

Part-time employees with benefits might be less likely to quit, either because they feel more motivated and valued at work, or because their benefits are essential to their lifestyle or wellbeing. Either way, less turnover means less time lost to hiring and training. According to Gallup, the all-in cost of losing an employee can range from one half to two times the cost of their annual salary. With that in mind, benefits that help to retain part-time staff could be cheaper in the long run than churning through employees on the lookout for them elsewhere.

What benefits do part-time employees get?

Part-time employees can get a range of benefits. Some are mandated by law, others are discretionary and provided to improve the employee experience and stand out from other employers in the market. Here’s an overview of five common part-time benefits:

Health insurance

Health insurance is federally mandated for employees who work more than 30 hours per week or 130 hours per month at a firm with more than 50 employees, thanks to the Affordable Care Act and IRS rules. But you can still opt to provide health insurance for part-timers who work less than that, or if your business is not quite 50 employees in size. 

A 2022 workplace benefits poll conducted by Protecting Americans’ Coverage Together and touted by the US Chamber of Commerce found that a whopping 96% of respondents viewed their health insurance as either extremely important (83%) or important (13%). With that in mind, health benefits are likely to be just as highly coveted by part-time workers as they are full-timers—and are worth considering as part of your benefits mix.

Retirement plans

It used to be that employers did not have to offer retirement benefits to part-time employees who work less than 1,000 hours in a calendar year. That changed with the arrival of the 2019 SECURE Act and its 2022 expansion, the SECURE 2.0 Act, which together aim to give more employees the chance to defer a portion of their income toward tax-advantaged retirement accounts like 401(k)s. 

In 2024, in addition to those working 1,000 hours, employers must offer so-called “long-term” employees—anyone who has worked at least 500 hours in a calendar year for the last three years—the chance to participate in a retirement plan. In 2025, that threshold drops to two years of at least 500 hours each. Employers do not have to make a contribution, but doing so would sweeten the deal for potential hires, and depending on the size of your business, you could be eligible for a tax credit by doing so. 

SECURE 2.0 includes tax incentives for businesses that make contributions to their employees’ accounts if they have less than 100 employees. It also made 100% of retirement-plan startup costs deductible for three years for businesses with less than 50 employees; those with 51-100 employees can deduct 50%. The bill also made it possible for small businesses to offer Roth (after-tax) options in SEP and SIMPLE IRAs.

Retirement benefits are highly coveted by workers, so they have the potential to reduce turnover on your staff. A 2022 survey from insurance provider WTW, formerly Willis Towers Watson, found that nearly 60% of employees cite retirement benefits as a reason to stick with their current employer.

Paid vacation and time off

Offering paid vacation and paid time off (PTO) to part-time employees is not required, but it’s a nice perk that they will almost certainly value. One way to go about this is to use your full-time vacation benefit as a guide—simply apply the same PTO accrual rate for every hour worked.

Sick leave

Cities and states have their own paid sick leave laws, and some require it for part-time workers. Often it is an accrual system based on the number of hours worked, up to a maximum. Some states allow you to frontload the time into a bank that the employee can draw down over the course of a year. You’ll need to research what’s required in your area, but either way, paid or unpaid sick leave can be an attractive part of your benefits package for part-time employees.

Effectively manage employee benefits with Rippling 

Rippling's Benefits Administration software consolidates all your benefits—medical, FSA, HSA, dental, 401(k), and more—into one system, automating enrollment, deductions, and administration, including for part-time employees.

If you're looking to streamline your benefits administration, Rippling is designed to make retirement plans like 401(k) more accessible and easier to manage for both you and your employees.

Rippling makes it easy and automatic to report your insurance coverage information to the IRS, and to generate and send 1095-C forms to your employees. 

With Rippling, you can:

• Gather relevant information about your company for reporting to the IRS
• Generate and file 1094-C forms for your company
• Submit reporting forms to the IRS and any relevant state agencies on time
• Generate 1095-C forms for all eligible employees and add them to your employees’ Rippling profiles
• Track all your compliance information, including plans that were offered, insurance-eligible employees, enrollment information, and more—all in one place

Rippling can also compete feature-to-feature with robust platforms like ADP Workforce, BambooHR, and Ease so you won’t have to switch systems as you grow. What’s more, Rippling can support employees and contractors in all 50 states and internationally—so you only need one system for a global workforce.

Frequently asked questions about part-time employee benefits

What is a part-time job?

There is no hard and fast definition of a part-time job, but generally speaking, it’s any job that requires less than a full-time commitment every week. The US Bureau of Labor Statistics considers anyone who works less than 34 hours per week to be part time. For the IRS, it’s anyone working less than 30 hours per week or 130 hours per month.

What are the advantages and disadvantages of hiring part-time employees?

From an employer perspective, there are pros and cons to part-time employment that you’ll want to consider as you staff up. 

• Advantages: On the upside, part-time arrangements generally offer more scheduling flexibility for both employee and employer. That includes the ability to easily ramp up or down seasonally and fill late-night or early-morning shifts. Part-timers are also generally less expensive to employ, which may allow you to have more personnel on staff at any given time.  
• Disadvantages: Part-time jobs are generally lower commitment than full-time jobs—and are often transitory or seasonal—so they can be easier to walk away from. You might experience higher turnover as a result. 

Can part-time employees participate in retirement plans like a 401(k)?

Most part-time employees can participate in retirement plans like 401(k)s or 403(b)s if they meet plan eligibility requirements. If they are at least 21 years old and work more than 1,000 hours in a calendar year, or have worked 500 hours for the past three years in a row (or starting in 2025, two years in a row), then you are required by law to offer them the option to make contributions to a retirement plan.

This blog is based on information available to Rippling as of September 18, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.