Why more employers are offering part-time employees full benefits
Paul Tanguay began his career with UPS 32 years ago, loading trucks part-time. Today, he is UPS’s global director of recruitment strategies.
This is not unusual in an organization that hires from within and where, on average, six out seven full-time drivers have been promoted from the ranks of part-timers who make up about 60% of the UPS workforce.
“What attracted me to UPS at the time was that even though the location where I worked didn’t have a tuition assistance program, they paid competitively and had a great benefits package,” Tanguay says. “Although I was a college student, at a very young age I was also engaged to be married, so I was looking for somewhere very stable to start my career.”
UPS is not alone in providing great perks to part-time employees. Other companies such as Penguin Random House, financial services firm Baird and law firm Perkins Coie give remarkably consistent responses when asked why their companies provide comprehensive benefits for part-time employees. They are betting that offering full-time benefits to part-time workers will build employee loyalty, boost presentism and stem the tide of job hopping among their workforce. And it’s not just part-timers asking for the benefits: full-time workers who want to shift to part-time work also are asking for the benefit coverages in order to achieve a positive work-life balance.
“In today’s tough labor climate, we want to make sure our workforce represents the community and is able to function on a day-to-day basis and be successful,” Tanguay says. “By offering these benefits in addition to fair hourly compensation, we differentiate UPS and attract a greater variety of applicants.
About half of UPS’s part-time hires each year are students, but the company’s 24/7 operation also attracts parents who choose to work off hours, independent business people interested in supplementing their income and retirees looking to earn additional cash.
Part-time employees must work for the company for one year to become eligible for benefits, and must work at least 225 hours in each subsequent three-month period to remain eligible. “Our typical part-timer works between 20 to 22 hours a week, so obtaining the hours needed to be benefits eligible is very achievable,” Tanguay says.
Most employees are unionized, and part-time union employees are eligible for healthcare, short-term disability, life and AD+D coverage under whatever multi-employer health and welfare fund pays their benefits. About 65 funds in the U.S. provide coverage to UPS union employees, and both full and part-time benefits are paid for via UPS contributions.
“We pay the contributions to Teamsters and they administer the program. As a result, the out-of-pocket costs for our employees tend to be limited to deductibles or co-pays,” Tanguay explains.
In addition, part-time employees are eligible for profit sharing and a stock purchase plan. The retirement plan for non-union employees is closed, but the UPS defined benefit pension plan covers part-time union members and remains open to new participants.
Among the other programs that are attractive to both part- and full-time employees is the “earn and learn” and tuition assistance program, which offers a $25,000 lifetime benefit to employees taking courses toward a degree at an accredited brick-and-mortar or online college or university. “We don’t require that the classes they take or the degree that they are working on be directly related to their job or our business at UPS,” Tanguay says.
By the numbers
ERISA attorney Carol Buckman says that though a repeal of the Affordable Care Act by the Republican-led Congress may be imminent, the ACA currently defines full-time employment as 30 or more hours per week and requires that employers with 50 or more full-time-equivalent employees provide health insurance to at least 95% of their full-time employees and their dependents up to age 26.
And when it comes to ERISA-qualified programs like 401(k) plans, Buckman notes that companies must cover employees who complete 1,000 hours of employment in a 12-month period. Employees cannot be excluded simply because they are part-time and not expected to meet the threshold in the eligibility period. However, she says, “This does not necessarily mean that any employer matching has to be at the same levels for full- and part-time employees.”
Data from the 2016 Mercer National Survey of Employer-Sponsored Health Plans reveals that 51% of large employers (500+ employees) offer health insurance coverage to part-time employees who work an average of 21 hours a week. Sixty-three percent begin coverage for newly hired employees at the date of hire, while 37% have a median waiting period of 60 days.
“Some part-timers are always going to fall somewhere below 30 hours,” says David Frazzini, a partner in Mercer’s San Francisco office. “I think 20 hours is a pretty common threshold that is used by employers.”
While it has been suggested that the 30-hour ACA threshold has been an incentive for certain employers to reduce part-time working hours so they don’t have to offer health insurance coverage, Frazzini says this has not been the case in his practice. But, he notes, “I think there is a lot more discipline now about getting the classifications right to make sure part-time employees are really part-time and full-time employees actually meet the definition.”
It is not surprising that UPS — where more than half of the workforce started out as part-timers — provides rich benefits to employees working less than full-time hours. Nevertheless, there are many notable employers with relatively few part-timers who extend similar or the same benefits to people who meet their minimum hours criteria.
Penguin Random House builds community
One example is publishing company Penguin Random House, which has approximately 5,000 employees in the U.S., excluding temporary workers. Only 1.1% of the company’s employees are part-time benefits eligible. Depending upon the facility, 35 or 40 hours per week are deemed to be full-time employment.
Page McInerney, Penguin’s vice president of HR, explains that benefit-eligible part-timers get all the benefits and perks that full-time employees enjoy, including comprehensive medical, prescription drugs, dental and vision coverage, life insurance, 401(k) match, short-term and long-term disability benefits, and voluntary benefits.
Employee contributions toward health benefits are based on salary tiers, so employees pay more or less depending on how much they earn. Other “soft” benefits, such as personal days, holidays and various other leaves, are pro-rated based on each individual’s scheduled hours.
Why does Penguin Random House provide such robust benefits for its small contingent of part-timers? “At PRH we are a community, and offering comprehensive benefits to our part-time colleagues is another way we can nurture a community feeling and team culture across the country,” McInerney says.
Best companies to work for
The list of 2016 Fortune 100 Best Companies To Work For reveals that most of the companies ranked in the top 40 that employ part-time workers offer them a benefits package. That said, eligibility and program details vary significantly.
Take law firm Perkins Coie, which is ranked 39th on the list. Though its headquarters are in Seattle, the law firm’s 2,180 employees work in 16 offices across the country. Eighty-seven percent of lawyers and support staff are full-time. “The reality is that we don’t generally hire people part time. They request a move to part time,” says Darrin Emerick, chief personnel officer. “It’s a way to retain our highly valued people, whether it be new moms who want to spend more time with their babies or older workers who want to slow down.”
The company pays 100% of healthcare coverage for employees who work 25 hours a week or more. Eighty percent of premiums are covered for people working 18.75 to 24 hours per week.
Part-timers also are eligible for a host of other perks and programs, including 401(k) matching at the same level as full-time employees, tuition reimbursement, paid maternity leave, back up child care and sabbaticals.
Emerick says the part-time benefits program helps the firm attract and retain the attorneys and staff it need to support its clients. “Specifically on the attorney side, allowing people to retain benefits when they work part-time has been truly valuable,” he says. “Otherwise we would have lost them.”
Financial services firm Baird is ranked sixth on Fortune’s list. Headquartered in Milwaukee, the company has offices in 30 states, plus satellite offices in the U.K., Germany and Asia. Ninety-seven percent of the company’s staff of 3,200 is full time.
To be eligible for healthcare benefits, employees must work 24 hours per week. Baird associates’ health insurance premiums are based on their compensation level, so associates who earn less pay lower premiums. Depending on the tier, Baird pays from 57% to 97% of each associate’s health plan premium.
Part-timers also are eligible for a 401(k) match, profit-sharing up to 4% of salary, college tuition reimbursement of up to $5,250, long-term care insurance and 16 hours of paid time off to volunteer. Other perks to make life easier for all employees include everything from fitness classes, a hair salon and a personal concierge service to Weight Watchers’ meetings.
But what really sets Baird apart is its program for paid interns. Interns who work only in the summer are classified as short-term interns. However interns who work full-time in the summer and part-time during the school year are viewed as long-term interns and get enriched benefits as a result.
Lisa Mrozinski, Baird’s director of total rewards, explains that long-term interns do not receive health insurance. However, she says, “they get paid holidays, and they can participate in our Baird Cares Day, where employees go into their communities to volunteer. They also get a $1,000 tuition reimbursement benefit, are considered for small year-end bonuses and become eligible for the 401(k) plan, plus employer matching if they work 20 hours a week.”
Why is Baird so progressive? “If employees are working part-time and adding value to the organization, we view them in the same way as any of our full-time associates,” Mrozinski says.