In this blog post, we'll walk you through the ins and outs of how the IRS and Department of Labor define full-time and part-time workers. The Scoop is your go-to resource for staying up-to-date on federal and state employment laws and regulations.
So how do you define these different types of workers? Correctly classifying a worker primarily comes down to two facets of the business relationship: the hours they work in a week, per month; and their ability to control how the services are performed. And for the purposes of the Affordable Care Act, the full-time employee and contractor distinction is also important.
In fact, if you have more than 50 employees, the Affordable Care Act requires that you offer some form of health coverage. Other than that, though, the shape of the benefits package you offer is largely up to you. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed. That level of control and independence fall into three categories, some of which may not be relevant for a particular situation.
However, businesses need to weight these factors when determining whether their worker can be classified as an employee or independent contractor. The IRS outlines the rules for common law employees as such:. Behavioral: Does the company control or have the right to control what the worker does and how the worker does their job? Type of Relationship: Are there written contracts or employee type benefits i.
Will the relationship continue and is the work performed a key aspect of the business? Generally, businesses regard individuals who work between 35 and 40 hours a week as full-time employees. You may even choose to classify someone who works only 30 hours a week as full-time.
How can you determine if you should pay your full-time employees by the hour or pay them a salary? Paying employees wages might mean the possibility of paying them overtime, so if you anticipate a worker occasionally taking on projects that require flexibility to work longer hours some weeks, and shorter hours others, understand that overtime could be a factor. Part-time employees are common law employees who work for you on an ongoing basis. However, the average number of hours they work per week falls short of what your company defines as full-time.
Just like full-time employees, you may choose to pay your part-time employees by the hour or via salary. Their rate of pay is generally equivalent to full-time salaried employees but on a prorated basis. For example, a part-time salaried employee who works three days a week will make 60 percent of what a full-time salaried employee who works five days a week with the same responsibilities takes in. People who work for you on a full-time basis will likely receive a broad range of benefits.
Many businesses also choose to offer benefits to part-time employees, though on a limited basis. For example, you may offer paid time off to full-time workers but not to those who work part-time. Insurance benefits for part-time employees may also be limited. You also have to pay the same types of taxes for part-time employees as you do for full-time workers.
To learn how to correctly classify interns, volunteers, temporary workers and more, check out our handy guide. Visit our Guide to Employment laws here. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
Adrienne is the content marketing manager at Justworks. Monthly tips on running a business in your inbox. Thanks for subscribing! Solutions Solutions. Pricing Pricing. Plans Plans. About About. Determining which employees are full-time employees is central to the employer shared responsibility provisions.
An employer must identify its full-time employees as part of determining:. For purposes of the employer shared responsibility provisions, a full-time employee is, for a calendar month, an employee employed on average at least 30 hours of service per week, or hours of service per month.
Under the monthly measurement method, the employer determines if an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least hours of service for each month. Under the look-back measurement method, an employer may determine the status of an employee as a full-time employee during what is referred to as the stability period, based upon the hours of service of the employee in the preceding period, which is referred to as the measurement period.
The look-back measurement method may not be used to determine full-time employee status for purposes of ALE status determination. For more information on each of these methods, see section Exclusion from the definition of hour of service is provided for services performed in certain capacities, which are not counted as hours of service for purposes of the employer shared responsibility provisions:. For more information about these exclusions, see our Questions and Answers page and section Certain categories of employees have hours of service that are particularly challenging to identify or track.
In other cases, general rules for determining hours of service in the employer shared responsibility regulations may present special difficulties. For these workers, employers are required to use a reasonable method of crediting hours of service that is consistent with the employer shared responsibility provisions. The preamble to the employer shared responsibility regulations provides guidance for the following categories on certain methods of determining hours of service that are reasonable and certain other methods that are unreasonable:.
C of the preamble to the ESRP regulations. More information about the employer shared responsibility provisions is available in our Questions and Answers. The Department of the Treasury and the IRS have also issued the following legal guidance related to the employer shared responsibility provisions:. More information is also available in this fact sheet PDF issued by the U. Department of the Treasury. More In Affordable Care Act. Basic Information Determining which employees are full-time employees is central to the employer shared responsibility provisions.
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