HR Magazine - April 2000: Recipes for Part-Time Benefits

Vol 45, No. 4

Employers are sweeetening the pot for part-time workers.

ately employers have been in a generous mood. The number and types of employer-provided benefits have increased steadily for the past few years, as companies experiment with ways to reward and retain workers.

While full-time wor kers have enjoyed most of the advantages of expanding benefits packages, there has been something of a trickle-down effect to part-time and non-traditional workers. Recent studies released by Hewitt Associates in Lincolnshire, Ill., and RewardsPlus in Baltimore both conclude that employers are offering more perks than ever to part-time em ployees.

"The talent shortage definitely means em ployers are having to rely more on people who work part-time or have nontraditional work arrangements," says Jon Van Cleve, a work/life consultant for Hew itt Associates. "Employers are also making all types of benefits more available to these workers in an effort to keep them on the job and productive."

The 350 employers that participated in the Hewitt study reported that part-time workers accounted for approximately 10 percent of their workforce. The U.S. Bureau of Labor Statistics (BLS), which defines part time as less than 35 hours per week, reports that 13.6 percent of the nation’s labor force works part time—about 19 million people.

But for most employers, "Less than 30 hours per week is a fairly standard definition of a part-time worker," says Gary Kushner, president of the management consulting firm Kushner and Co. in Kalamazoo, Mich.

"You don’t see a lot of workers who put in an average of 30 to 34 hours a week. Once you get above 30 hours, most people work full-time schedules."

Some employers use several categories for their workers, such as full-time, partial full-time and part-time. These tend to be larger companies (5,000-plus employees) and may provide a wide variety of benefits plans to their employees.

Whatever your definition, both the Hewitt study and BLS data show that employers are planning to hire and use more part-timers over the next five years.

A Fundamental Change

Two fundamental shifts in the workforce seem to be driving this expected increase in part-time workers. The first is the aging of the workforce. Over the next five to 10 years, members of the baby boom generation will approach retirement age, and many will want to reduce their work hours. Many employers refer to the reduction in hours as "phased retirement programs." As a growing number of employees choose phased retirement, many will lobby for continued benefits.

The second fundamental shift is a movement to balance work/life issues. In response, employers are providing a wider array of benefits and are justifying their generosity by calling them work/life benefits.

"Traditionally, it has been hard for employers to justify providing benefits to part-time workers, but that’s changing as employers feel more pressure to provide benefits across the board," says Ann Vincola, senior partner of Corporate Work/Life Consulting in Boston.

Vincola says that nearly two-thirds of part-time workers are women, and that most have chosen abbreviated schedules because of dependent care needs. While many of these women have working spouses, many are single parents or sole caregivers. These workers desperately need all the benefits and support that their employers can provide, Vincola says.

"I think employers have generally assumed that their part-time workers were covered by their spouses’ or family benefit plans, so they felt that they didn’t need to worry about these workers," Vincola says. "But that attitude is changing. Employers are becoming more sensitized to the needs of part-time and nontraditional workers, but it has been a slow process."

A Benefits Bonanza

According to the Hewitt and RewardsPlus studies, a majority of employers provide some benefits to their part-time workers. Both studies found that more than 80 percent of surveyed employers provide vacation, holiday and sick leave benefits and that more than 70 percent offered some form of health care benefits.

"Actually, health care benefits for part-time workers is much more common than most people might think," says Van Cleve. "I believe that the real growth area in employer-provided benefits for part-time workers is alternative work arrangements."

Allowing part-time workers to participate in alternative work arrangements might just sound redundant, but Van Cleve explains that a growing number of employers are allowing part-timers to telecommute and to design their own schedules.

"That may not sound like much, but this is actually a tremendous step forward for part-time workers," Van Cleve says. "Employers are beginning to provide them even more flexibility in their work arrangements and hours, which I believe is a very important trend. Most part-time workers have had to work set hours with not that much flexibility in their scheduling."

Prorated Benefits

Most employers prorate benefits to their part-time workers. The most common way to calculate the accrual rate for benefits is to divide the employees’ average work hours by the hours in a full-time week. For example, if the average work week is 37.5 hours, an employee who works 25 hours a week would accrue benefits at 66.7 percent or two-thirds of the full-time rate.

If an employer provides health care benefits to part-time employees, it may also use this simple formula to calculate how much it will contribute toward employee health insurance premiums. Typically, employers want part-time workers to pay higher premiums because their health care costs will be comparatively higher. So, using the example above, the employer would offer part-time employees only two-thirds of the contribution rate it offers full-time employees.

The prorated approach, while common, can make administration of health plans more burdensome, especially at smaller companies. An easier method is to use a tiered approach, according to Kushner.

"Let’s say an employer subsidizes health insurance premiums at 90 percent of the cost for full-time employees," says Kushner. "If it uses the tiered method, the employer would then subsidize 50 percent of the health care premiums for employees who work between 25 and 30 hours per week and 25 percent for employees who work 20 to 25 hours."

However, an increasing number of employers are beginning to offer full access to their benefits plans and are eliminating the prorated benefits schedules, according to Ed Susank, a principal with the health care group benefits practice of William M. Mercer Inc. in Washington, D.C.

"Among employers that we survey on their benefits practices, the percentage of respondents offering various benefit plans to part-time employees has not changed dramatically over the past several years," Susank says. "What has changed, however, is that there is less prorating of benefits for part-time employees."

Susank says that the companies featured in the best-employer lists of Fortune, BusinessWeek and WorkingMother magazines are very generous to part-time workers.

"More than 90 percent of these companies typically offer retirement savings, health care, life and disability insurance to their part-time workers on the same basis that they do for their full-time employees," says Sus ank.

A Competitive Edge

Why are these employers being so generous to their part-time workers? The answer is simple: To gain a competitive edge in today’s ultra-tight labor market.

The Kalamazoo County, Mich., government, where approximately 12 percent of 1,000 employees work part time, started providing benefits to part-time workers in the early 1980s. The decision is paying big dividends today, according to Rick Kinas, SPHR, the county’s human resource director.

"We are in an area that has an unemployment rate of 3 percent or less, and the county has to compete with all the private-sector employers to find qualified workers," says Kinas. "We need a competitive edge to get top quality applicants and then keep them on the job after they are hired, and the benefits package has given us that edge."

Carrie Klein, an attorney and team leader for Kalamazoo County Family Court Services, says the generous benefits package has kept her on the job for the past six-and-a-half years. Although Klein’s job is a supervisory position, she works only part time through a job-sharing arrangement.

"I love my job situation and wouldn’t trade it for the world," she says. "There’s just no way I could work in private practice, have the schedule that I keep and still receive a full range of benefits. It’s really worked out well for me and my family."

Klein says she would probably not work at all if she wasn’t able to work part-time and still receive a full range of benefits.

"It really is the best of both worlds, and I appreciate the opportunity that the county has given me to work and still have time for my family," says Klein.

The Opposite Side Of the Benefits Coin

Still, many employers are finding that expanding benefits to nontraditional workers isn’t the best option.

Smaller employers generally don’t have the resources to provide a wide array of benefits to their full-time employees. Norman Naughton, owner of HR Directions Inc. in Hartland, Wis., says providing benefits to part-time employees is pretty much a non-issue among his clients.

Naughton’s company provides HR and benefits administration support to client companies in Southeastern Wisconsin. All of his clients have 300 employees or fewer. He says his clients are more concerned about filling their full-time positions and don’t hire many part-time workers—less than 1 percent of his clients’ collective staffs work part time.

"They are looking to fill the full-time jobs, which is a constant struggle. I just don’t see them looking to hire more part-time workers," he says.

He adds that many clients and companies also have expressed a real concern that providing benefits to part-time employees will exacerbate their staffing woes.

"If you start providing benefits to part-time workers, then how many full-time workers will want to cut back their hours?" Naughton asks. "It’s a real fear among the smaller employers. Many of these companies are now seriously understaffed, and, if the employees they have now decide to cut back hours because they will still receive their benefits, that just might push some companies over the edge."

Many industries and workforces may not be suited to providing benefits to part-time workers. Movie Gallery, a chain of video rental stores headquartered in Dothan, Ala., has about 7,200 employees in 29 states, nearly 6,000 of them part-time. The company provides limited benefits to part-time workers, such as access to the company’s defined contribution savings plan and membership in a credit union, according to HR Manager Jim Pongonis.

He says that providing a wider array of benefits to part-timers would be "an administrative nightmare." Most of the part-time employees work as video store clerks and tend to be high school and college students and people who want temporary jobs while looking for other work.

"We have a turnover rate of 110 percent, which is typical for video stores," says Pongonis. "Can you imagine the administrative headache we would face if we offered these employees full health coverage? Just the thought of trying to comply with COBRA under those circumstances makes me shudder."

Pongonis says he would consider providing catastrophic health insurance to the company’s part-time workers if he could find an effective, low-cost plan.

"I think this would be a great benefit to our younger employees. They just don’t worry much about their health, but this plan could help them out if they broke their leg or were injured in a car accident," says Pongonis. "We want to provide all the benefits that we can within a reasonable cost. It does help to keep people happy and on the job."

And that’s the ultimate goal of any benefits plan. Employers just have to find an appropriate balance between the contributions of their part-time workforces and the cost of providing the benefits.

Bill Leonard is senior writer for HR Magazine.