The number of full-time vs. part-time employees on your team determines whether you’re a small employer (SE) or an applicable large employer (ALE). This distinction is important for determining which benefits you’re required to offer at your business.
The full-time vs. part-time definition can also impact whether your employees are considered salaried, hourly, exempt, or nonexempt, which can also impact your overtime pay requirements.
That’s why it’s crucial to understand the difference——and how many hours part-time and full-time employees typically work—before hiring employees at your small business.
Tell me more. Why does the full-time vs. part-time definition matter?
Knowing how many full- and part-time employees you have affects a number of business classifications and decisions.
1. You may be required to offer health insurance
If you have more than 50 full-time or full-time equivalent employees, the Affordable Care Act (ACA) considers you an “applicable large employer” and requires you to offer health insurance to those full-time employees. But figuring out how many full-time employees you have isn’t as easy as counting who’s in the office every day.
Here’s how the ACA does the math:
- First, you count every employee who works, on average, at least 30 hours per week or 130 hours per month. These are your full-time employees.
- Then you count your “full-time equivalent employees”—or a combination of part-time employees who equal one full-time employee. To get this number, add up the number of hours all of your part-time employees work during the month, up to 120 hours per employee, and then divide the total by 120. These are your full-time equivalent employees.
- Combine the number of full-time employees and full-time equivalent employees. If the sum is greater than 50, then you’re an applicable large employer.
If you have fewer than 50 full-time employees, then the ACA considers you a small employer. In most states, you’re not required to offer health insurance benefits—but if you would like to, you still can.
2. You may owe your team other benefits
In addition to knowing if your employees are full-time vs. part-time, you’ll also need to know if they’re exempt or nonexempt. This is essential for determining if your team is owed certain benefits, like overtime pay, under the Fair Labor Standards Act (FLSA).
While you can’t automatically determine the exemption status of your employees based on how many hours they work, part- and full-time categorizations provide a helpful framework.
You can pay a full-time worker a salary that doesn’t meet exempt requirements—which means you’ll need to pay overtime if they work more than 40 hours in a week. Likewise, you can pay a part-time worker a salary that does meet those exempt requirements, which means you won’t have to pay overtime if they work more than 40 hours per week.
How many hours is part-time exactly? And how many hours is full-time?
Many companies use 35 or 40 hours as a baseline for full-time hours. Anything below that threshold is typically considered part time.
The thing is, different federal laws and agencies define “full-time hours” and “part-time hours” differently, as do individual states.
For the most part, you as the employer can set the definition for a full-time or part-time employee at your company.
However, you can’t fully set your own definition if you offer health insurance to full-time employees. If you provide health insurance, then you need to use the ACA definition of full- and part-time employees.
According to the ACA:
- A full-time employee works an average of at least 30 hours per week or 130 hours per month for more than 120 days in a year.
- A part-time employee works an average of fewer than 30 hours per week or fewer than 130 hours per month for more than 120 days in a row.
The FLSA doesn’t set a number of minimum hours for “full-time.” The only other official federal definition of part-time and full-time hours comes from the Bureau of State Labor Statistics (BLS).
According to the BLS:
- Full-time employment is 35 hours or more per week.
- Part-time employment is 1–34 hours per week.
The BLS definition is not a hard-and-fast rule, but more a general guideline for reporting out labor statistics.
Some states define minimum hours for full-time and part-time, although it’s usually to help determine your benefits requirements.
The Hawaii Prepaid Health Care Law, for instance, requires you to offer health insurance to any employee who works at least 20 hours per week. In California, full-time hours are defined as 40 hours per week.
Make sure you research your state’s laws surrounding full- and part-time hours to ensure you’re classifying your employees appropriately.
Still a little confused? Here’s a general rundown.
The biggest differences between full-time vs. part-time employees
|Full-time employee||Part-time employee||Why it's important|
|Who should receive employee benefits?||These workers receive the full range of employee benefits.||These workers may receive none, some, or all employee benefits, but it’s entirely up to the employer*.||Benefits cost money but attract higher-quality employees. Employers need to determine their priorities.|
|Am I required to offer health insurance?||Maybe, depending on how your employees are classified. The Affordable Care Act says a full-time employee works an average of at least 30 hours per week for more than 120 days in a year.||Maybe, depending on how your employees are classified. The ACA says part-time employees work an average of fewer than 30 hours per week.||Employers with 50 or more full-time and full-time equivalent (FTE) workers (when added together) are required to provide health insurance coverage to employees.|
|Do I have to define the difference in my employee handbook?||Maybe. You’ll determine this as the employer.||Maybe. You’ll determine this as the employer.||By defining the difference between part-time and full-time employees in your employee handbook, you can protect yourself from potential lawsuits.|
|Do I have to withhold payroll taxes?||Yes||Yes||Whether an employee is full- or part-time, employers still need to withhold income and FICA taxes.|
|Are employees covered by the Federal Fair Labor Standards Act (FLSA)?||Yes||Yes||The FLSA leaves the definition of full-time and part-time up to the employer, but it states that the FLSA still applies for both groups.|
|Are employees considered exempt or nonexempt?||Full-time workers are typically exempt, so you don’t have to pay minimum wage or overtime.||Part-time workers are typically nonexempt, so you do have to pay minimum wage or overtime.||Exemption statuses don’t align perfectly with employees’ part- or full-time status (see below).|
*This is not the case, however, if there’s a state law that requires an employer to provide certain benefits.
What are the benefits of hiring both types of employees?
There are pros and cons to hiring both part-time and full-time employees, depending on your business and the type of work you do.
|Part-time employees||Full-time employees|
- Could be cheaper, because benefits generally aren't required
- More flexibility- Additional help in times of need
- May be more dedicated to your business
- Can handle higher workloads
- May not be as dedicated to your business
- May be less knowledgeable about long-term business plans and products
- Increased payroll and benefits costs
- Training requires more resources- Lack of flexibility leading to decreased work-life balance
What should I do now that I know the difference between full-time vs. part-time employees?
Besides the ACA definition or any applicable state laws, there are no legal definitions of part- or full-time employment—so having a clear employee handbook is essential.
In your handbook, make sure to clarify:
- Exactly how many hours an employee needs to work to be considered full-time at your business
- That any employee working fewer hours is considered part-time
- Whether your full- and part-time employees qualify for benefits. These may include health insurance or a 401(k) plan.
While you certainly can hire a part-time employee to fulfill similar functions as a full-time employee, it’s important to steer clear of discrimination. For example, if you only hire applicants of one protected group as part-time employees—even when they’re doing similar duties to other workers—that can be seen as discrimination.
It’s also important to follow any relevant state laws. If your state designates certain roles or workloads as part- or full-time, make sure that’s reflected in your employee handbook and in your practices.
Taking full advantage of full- and part-time employment options can help your business be more flexible and productive. But it’s important to understand the laws to ensure you aren’t discriminating or failing to provide the benefits you’re required to offer.