There is no universally accepted definition of what constitutes full-time hours. While the Affordable Care Act (ACA) defines full-time employees as those who work 30 hours per week, the IRS sets this at an average of 32-40 hours per week. Employers, however, are free to decide whether a 30-hour, 35-hour, 37.5-hour, or 40-hour full-time contract best suits their business needs.
The definition of full-time hours may dictate whether employees are eligible for fringe benefits and could have implications for your hiring strategy and pay structure. When hiring a full-time employee (FTE), you must consider tax and training implications. You must also fulfill your legal responsibilities to your employee at a state and federal level. Therefore, your company needs to have its own clear definition of what constitutes a full-time contract and understand the other contexts under which your employees may be working full-time hours.
How Full-Time Hours Affect Company Benefits
Employees pursuing full-time employment usually look for more than just a casual job. They’re looking for career progression and benefits. Employees usually receive fringe benefits if they hit a company-defined threshold of working hours. This threshold usually separates what the employer believes to be full-time hours (above threshold) or part-time hours (below threshold). You might also decide to extend benefits only after employees have passed their probationary period or completed a year’s service.
Note that it is not a legal requirement for you to provide fringe benefits to your employees. However, it helps contribute to strong company culture and may make your employees feel more appreciated—ultimately increasing employee tenure.
Company benefits may include paid sick leave, paid vacation leave, paid parental leave, or any other type of paid time off. Life insurance, dental insurance, or retirement accounts may also be included. As a company, you can define your employees’ benefits and distinguish which employees are eligible for certain benefits. However, you must consider whether you can afford these benefits for your employees and factor this into your hiring strategy.
Some businesses extend the same fringe benefits to both full-time and part-time employees. Alternatively you might consider expanding your company benefits package based on the number of hours an employee works. However, you should bear in mind that not offering the same benefits to a part-time employee may be discriminatory if that employee cannot work full-time for a reason related to a protected characteristic.
How Full-Time Hours Affect Federal Benefits
While providing company benefits to either full or part-time employees is not a legal requirement, fulfilling federal regulations regarding benefits is.
For instance, depending on how many hours your employees work and how many people you employ, you may be required to pay for health insurance. If you employ the equivalent of 50 full-time employees—for example, 100 part-time employees—you must offer health insurance that meets ACA minimum requirements. to all those working over 30 hours per week.
Calculate your FTE
If you’re unsure about your number of full-time employees and whether you’re obliged to pay for health insurance, here’s how to calculate your FTE.
Step 1: Calculate how many hours each part-time employee works on average per week. Add these hours together to get your total.
Step 2: Divide your total by 30 and round up to the closest whole number.
Step 3: Add this to your total number of full-time employees. This is your equivalent number of FTE.
Here’s an example of how this might work in practice.
Suppose you’re the manager of a company that employs 40 full-time employees: 16 employees who work 30 hours per week, and four employees who work 24 hours per week.
Step 1: (16 x 30) + ( 4 x 24) = 576
Step 2: 576 ÷ 30 = 19.2, rounded up to 2
Step 3: 20 + 40 = 60 FTE
So, in this case, as you have over 50 full-time employees, you would have to provide those working over 30 hours per week with ACA-approved health insurance.
Employers are free to decide how many hours constitute full-time employment within their businesses and are free to decide what benefits they offer to those employees. However, they may be obliged to provide health insurance that meets ACA minimum requirements should they exceed 50 full-time employees or the equivalent.
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