What's the Difference Between Part-Time Employees and Full-Time Employees?

Learn the difference between part-time employees and full-time employees: calculation, schedules, payments, and tax reporting.

Anja Simic
Written by Anja Simic
September 27, 2021
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The difference between part and full-time employees is more than just the number of hours worked. Business owners should also take into account additional factors such as health insurance and payroll taxes. Here's what you should know when planning your talent capacity:

Are you a small employer or an applicable large employer?

The type of hires you make will put you in one of the two categories. In the US, companies are classified as a small employer (SE) or an applicable large employer (ALE). The category determines the benefits you need to offer to your employees since small businesses have fewer obligations.

According to the Affordable Care Act (ACA), if you have more than 50 full-time or full-time equivalent employees, you're considered an ALE and you are required to offer health insurance to every full-time employee.

The number of full and part-timers is also relevant when you are determining the type of employment that impacts overtime pay requirements under the Fair Labor Standards Act (FSLA). It matters whether your employees are salaried, hourly, exempt, or nonexempt.

What is a full-time equivalent (FTE)?

This is a question that requires additional context. While you might rely on a rule of thumb to classify a worker as full-time based on their work hours, there is actually no universal definition of full-time employment. Individual states and government agencies all define full-time and part-time hours differently from each other. So one size does not fit all and your math will work out differently in different contexts.

In any case, FTE stands for a full-time equivalent. FTE is an alternate way of counting your workforce that is more accurate than just counting the number of people who work for you. The FTE is calculated by comparing the number of working hours to the number of hours worked by a full-time worker. Typically, the FTE benchmark is 8 hours each workday, totalling 40 hours each workweek, or 2,800 hours per year. For example, if an employee works 30 hours a week, using a 40 hour/week benchmark they would be considered to be 30/40 = 0.75 FTE.

Employers are allowed to set their own definitions for FTE and determine the benchmark for the number of hours needed to be considered full-time. However, they'll still need to make sure they comply with the federal laws that may use a different definition of the FTE.

For example, the Affordable Care Act’s FTE definition is important to know because it determines whether or not you are required to provide health insurance. For them, a full-time employee needs to work, on average, at least 30 hours per week, or 130 hours per month. Additionally, they need to be working for more than 120 days per year. On the other hand, a part-time employee works less than that, meaning that they can’t work more than 30 hours per week, 130 hours per month, or 120 days per year.

On the other hand, the Fair Labor Standards Act (FLSA) doesn’t have a minimum number of hours that a full-time worker needs to complete. The U.S. Department of Labor leaves it up to the employer to decide. You can look to the Bureau of Labor Statistics (BLS) for guidance, although they use completely different math. According to them, anyone working between 1 and 34 hours per week is considered part-time. If they work 35 hours or more, they are considered full-time. This calculation is used to determine benefits, and it is more a guideline than a strict rule that needs to be obeyed.

Each state may have its own definition and accompanying rules, so you'll need to ensure that you are complying with state laws. If your business is in California, full-time employment will be the standard 40 hours per week. However, Hawaii's Health Care Law requires employees to pay health insurance for each employee that works at least 20 hours per week.

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What is part-time work?

Part-time employment depends on the amount of time someone works. Part-time workers are any employee who works fewer hours than someone working full-time. Part-time workers differ in other areas too: they usually have flexible schedules, fewer responsibilities, and tasks, and they almost always have fewer benefits than full-time employees.

Ultimately, it is the business owners that make the distinction and create rules and guidelines that will determine which positions need to be filled by part-time employees. All of this should be part of the employee handbook, and it is the responsibility of the human resources department to communicate the company’s stance to its employees.

Although there are no employment laws that require business owners to provide benefits to part-time workers, that doesn’t mean that they aren’t allowed to do so. Health insurance and paid time off are amongst the common employee benefits offered to those that don’t meet the minimum requirement for full-time employment.

Schedules for full-time work vs part-time work

Employees with full-time status are usually the ones whose work schedules remain consistent. Although they might work in shifts, or even odd hours, nights, evenings, etc, they almost always work 5 days a week, 8 hours a day.

On the other hand, part-time workers don't have guaranteed work hours. Their schedules are usually more flexible and their day to day can vary. They might work a couple of hours one day and a double shift the next, covering weekends, absences, or holidays. This is why part-time workers are often students and some may have several part-time jobs in order to juggle responsibilities or hobbies.

Payments for full-time employees vs part-time employees

A common misconception is that part-time employees are paid less than full-time workers. However, this doesn’t have to be the case. What is most certainly true is that the manner in which their pay is calculated is entirely different.

Full-time employees are almost always paid a flat salary, regardless of the hours worked. Salaried employees receive the same pay, even if they leave work early or they pull an all-nighter. They can, of course, have different bonuses, but their salary remains unchanged. On the other hand, part-time employees are usually paid by the hour. That means that their paychecks vary based on how much they work each week. It is fairly common to have part-time workers submit timesheets, or clock in and out, based on the type of work they hired to do.

As we mentioned, it's common for part-time workers to receive no benefits whatsoever. Full-time workers can have not only health insurance and paid time off, but also vacation time and perks like reimbursements for education and fitness costs.

Taxes for full-time employees vs part-time employees

When it comes to taxes, this distinction isn’t that important. Income is income, so according to the IRS, both types of employees are taxed the same. Payroll and income taxes need to be withheld from their wages - this includes federal income tax, Medicare, and Social Security. In addition to this, you are required to pay unemployment taxes, and in some states, employers are required to provide workers’ compensation benefits. Of course, there are also state and local income taxes that you need to keep in mind.

Exempt and non-exempt workers

When it comes to this issue, there is one other distinction set out by the Fair Labor Standards Act (FLSA) that you need to keep in mind. The terms "exempt" and "non-exempt" employees matter a lot to a business owner because the classification determines whether or not you need pay your employee overtime.

First, we have exempt employees. Exempt employees do not get paid for their overtime hours. In order for someone to be labeled exempt, they need to receive a flat salary in the amount of at least $35,568 per year and their level of responsibility at work needs to be high.

On the other hand, we have non-exempt employees. They receive wages, almost always paid by the hour worked, they are paid at least the minimum wage and their responsibilities are limited. Part-time workers are almost always nonexempt, which makes them eligible for overtime. Overtime is paid 1.5 times the agreed hourly wage of the employee.

Read more about the exempt vs non-exempt employees classification

Do part-time workers get overtime?

Yes, part-time workers can still get overtime. The definition of overtime depends on state regulations, but typically it's calculated on a daily basis. That means if you work over a certain number of hours in a day (usually eight), you qualify for overtime pay. If you work more than 40 hours a week, you may qualify for overtime as well.

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