Part-time vs. full-time: Everything you need to know

Whether you hire full-time or part-time employees depends on the needs of your business as well as state and federal regulations. For example, certain hourly thresholds may mean you must offer your employees health insurance or paid family leave. This means it is essential to distinguish between the two — or risk potentially facing legal trouble or overextending your labor budget.

In this guide, we do a deep dive into what it means to be a part-time vs. full-time employee and its implications.

When is an employee considered full time?

Categorizing employees as “part time” or “full time” isn’t as cut-and-dry as one would think. While full time is generally considered working 40 hours a week, according to the Fair Labor Standards Act (FLSA), the employer determines whether an employee is full time or part time. 

An exception to an employer’s responsibility to define an employee as full time or part time is when applying the Affordable Care Act (ACA). Under the ACA, an employer that employs at least 50 full-time employees or a combination of full-time and part-time workers that equal 50 full-time employees must provide employee health insurance benefits.

Under this rule, a full-time employee works at least 30 hours a week or 130 hours a month. However, if you have a team of part-time employees, you must also account for “full-time equivalent employees” and doing so changes how you must apply the ACA to meet federal requirements. The IRS defines a full-time equivalent employee as “a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.”

Calculating full-time employees for the Affordable Care Act (ACA)

The number of full-time employees you have in your business determines what benefits you must offer full-time employees under the ACA. Here’s the breakdown of how to determine how many full-time and full-time equivalent employees you have and the impact on your requirements: 

If the resulting number is 50 or more, you are considered an applicable large enterprise (ALE) and you must provide health care benefits for your full-time employees and their dependents to meet the ACA requirements.

If you do not provide affordable coverage for your full-time employees and you are an ALE, you must pay a penalty (called a shared responsibility payment). The penalty equals $2,000 per full-time employee above 30 full-time employees in your company. For employees who claim the premium tax credit for not receiving affordable health care from your company’s coverage, you must also pay $3,000 to the IRS. 

Pros and cons of full-time employees

Pros 

Cons

When is an employee considered part time?

As mentioned, the federal government does not clearly define part-time employment. In this respect, it’s largely up to the employer how to determine whether an employee falls under this category. Many employers use their own definition of full- and part-time employment to determine company policies around benefits and perks, such as how much paid time off (PTO) an employee is entitled to. 

“The lack of distinction between full-time and part-time employment under the law is actually a good thing because it allows for freedom of contract,” says Travis Tatko, an employment law attorney and partner at Capell Barnett Matalon & Schoenfeld, LLP, a law firm based in New York City. In other words, as the employer, you can classify what it means to be a full-time versus part-time worker at your company and what entitlements and benefits come with the status.

The ACA and part-time employees

However, under the ACA’s shared responsibility rules, a full-time or part-time employee is clearly and legally defined. We’ve already overviewed how to calculate how many full-time employees you have under this act’s requirements. However, if your calculations deem that you have fewer than 50 full-time and full-time equivalent employees, it exempts your business from the ACA’s requirement that you provide health care benefits to your full-time employees or pay a penalty. 

The Family and Medical Leave Act and part-time employees

Similarly, the Family and Medical Leave Act (FMLA) also has its own definition of who qualifies for emergency leave based on the number of hours they work. This act only applies to companies with at least 50 employees. 

Under this act, an employee must have worked for the company for at least 12 months and, during that 12-month period, worked at least 1,250 hours to receive paid leave in the event of a family circumstance in which leave is needed. That averages out to about 24 hours per week worked or a part-time employee under most definitions. If an employee meets this requirement, they may take a total of 26 weeks of leave to care for a family member, for example, in the event of an adoption, birth or serious illness.

State laws and part-time employees

Some states may also have guidelines on what is considered a part-time employee. As such, these guidelines may affect the types of benefits or other work provisions you must offer your workforce. It’s important to check your state’s laws to ensure your part-time employees are indeed part-time employees by your state’s definition and, in turn, to ensure you comply with state laws.

Pros and cons

Pros 

Cons 

Why is classifying full time or part time important?  Benefits administration requirements

An employee’s eligibility for health insurance, disability insurance, a flexible spending account, a health savings account or paid time off is often determined by whether they are a full-time or part-time employee, either by the employer’s definition or state or federal-act definitions. 

“Benefits are often where employers set the terms of eligibility to participate in, for example, a retirement plan, or to set parameters for their company’s paid time-off policies,” says Tatko. “This is where some benefits might be eligible for someone who is full time but not a part-time employee.” 

The cost of benefits impacts your operating costs and how many full-time and part-time workers you can hire for your small business. According to the Bureau of Labor Statistics, wages and salaries cost employers $29.86 and benefits cost $13.39 per employee per hour worked. 

Paid time off

Employees’ PTO offerings can also hinge on whether they have part-time or full-time roles within your company. Typically, full-time workers accrue more hours and can be eligible for more paid time off. When creating a paid time off (PTO) policy for your company, you also need to adhere to jurisdiction requirements at the city or state level. 

Family and Medical Leave Act (FMLA) 

Under the FMLA, eligible employees can take unpaid leave for certain family and medical reasons if they have worked an average of 24 hours per week for the last 12 months of employment with the company. Hires also need to work within 75 miles of where the employer employs 50-plus employees. While on leave, in addition to continuing their employment status, they can also continue their employer-offered group health insurance coverage without any changes to their policy or gaps in coverage. 

Employees are eligible for 12 weeks of leave in 12 months for the following reasons: 

If the employee’s child, parent or spouse is a servicemember on active duty, they can also qualify for FMLA if the servicemember experiences a serious injury or illness and the employee needs time away from work to care for the servicemember. 

Overtime 

Overtime pay requirements can apply to both full-time and part-time workers. However, the number of hours your employees work, their occupations, their wage arrangements and their duties can determine whether you must pay them overtime wages or not. To learn more about your overtime pay requirements, read our exempt vs. nonexempt employee guide.

State and local labor law regulations

It’s true that the general definition of a full-time worker is someone who works at least 30 hours a week or 130 hours a month for more than 120 days in a row. And many small businesses define full-time work at 30 or 35 hours a week. However, federal laws and agencies can define “full time” and “part time” differently. The same goes for local and state labor laws. 

You must comply with local and state labor laws on how full-time workers are classified and what you’re responsible for providing as an employer to your full-time workers. For example, some states have specific rules on paid sick leave that are determined by the number of hours an employee works. 

In New York, if you have at least five employees and a net annual income of at least $1 million, the sick leave law allows any employee to accrue a certain amount of sick leave for every hour worked, even if the employee is classified as part time.

Frequently asked questions (FAQs)

When do companies prefer part-time workers over full time?

Some companies may prefer to hire part time because part-time workers may offer greater flexibility in their work arrangements, allowing businesses to adapt to labor needs as they evolve. Similarly, part-time workers are sometimes easier to recruit and train when needed.

In addition, for some part-time workers, employers may not have to extend certain benefits, such as health care benefits, helping the company to minimize labor costs.

What does exempt employee mean?

An exempt employee is an employee who is not eligible to receive overtime pay. This type of employee usually fills a salaried position in an executive, administrative, professional creative, computer or outside sales role within a company. Exempt employee salaries must not fall below $684 per week. 

To learn more about overtime pay requirements for your employees, read our exempt vs. nonexempt employee guide.