Dangers of Hiring Part-Time Employees

August 11, 2016 | By | Reply More

part-time employees
Entrepreneurship is one hard decision after another. Do you pursue a small business loan or seek an equity investment. Is it time to hire new employees? Each decision is important because it affects the overall financial, cultural and brand health of the company. Eventually, every business owner will need to decide: if they will hire part-time or full-time employees.

Why Does an Employees Employment Status Matter?

The employment status of employees will affect whether or not companies are required to provide health insurance for their employees. The Affordable Care Act made it so all businesses with 50 or more full-time (30 or more hours) employees must provide an affordable health insurance plan for their employees. Failure to provide an affordable plan would lead to making an Employer Shared Responsibility fee for some of their uninsured employees.




In response to the Affordable Care Act, many national chains like Target and Walmart began to hire more part-time employees in order to avoid the steep financial cost of paying for health insurance.
 
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Should you follow in the footsteps as a new company and begin hiring part-time now? Not necessarily, you have a bit of time. Companies are not fined for not complying with the Affordable Care Act until they exceed 30 full-time employees. And after they are charged the Employee Shared Responsibility (ESR) Fees, they only need to pay the $2000 fine for every employee after the first 30.

That means as a new company, you won’t need to worry about how you will provide health insurance or pay the fees until you become financially stable enough to hire a large number of employees. Depending on how fast you grow that could be a year or two down the road.

Just have your Accounting and HR departments keep an eye on that number and report to you when you are coming close to needing to pay the ESR fees. At that time, you can evaluate whether or not you want to move to a part-time system.

Perils of Maintaining a Part-Time Work Force

If you have a part-time system of hiring, all managers and employees should be aware of what the Affordable Care Act classifies as a full-time employee. The last thing you want is for multiple employees to accidentally work more hours than they should and cause you to be blindsided with ESR fees.

Part-time employees cannot work 30 hours or more per week. Smaller companies have less to worry about on this front. If an employee dips into full-time on accident, chances are you won’t be charged (depending on how many full-time employees you have on staff). Often companies who utilize this system of employment allow management to work full-time.

The fact that your companies might not be that big does give the company some margin for error, but as the company grows the margin of error will no doubt decrease as you add full-time employees to various different leadership positions.

If your company branches out into different locations, you should be aware that every location counts within the full-time employee tally.
 
>> RELATED: Hiring and Keeping Employees: A Challenge for Small Businesses
 
Recently a Nampa, Idaho Hastings had that problem when management didn’t realize that an employee accidentally worked 40 hours a week over a period of 3 months without offering health benefits. Due to the fact that that particular Hastings was not a privately owned franchise, it meant that there was no margin of error. The company was fined for not complying with the Affordable Care Act over that 3 month period.

Even if you don’t have enough managers between a few different locations, you might still want to be wary. An Idaho coffee shop, Moxie Java, recently stumbled their way into a financial mess when they allowed one employee to work part-time (around 29 hours) at two different locations. Even though they are managed by different people, they’re technically one company. Which means the employee spent a year working 60 hours a week. Moxie Java might not have qualified for an ESR fine, but they have a large amount of overtime that they need to back pay the employee. An equally costly mistake.

The larger the business grows, the more vital it is that management and employees all monitor part-time employee hours meticulously. If your company branches out into different locations, you should be aware that every location counts within the full-time employee tally.

Negative Brand Publicity.

Around the time of their decision to move to a workforce primarily composed of part-time workers, Walmart was met with dozens Walmart Bails On Obamacare – Sticks Taxpayers With Employee Healthcare Costs articles. Depending on the person’s philosophy, such an outcry could lose potential customers.

All companies who utilize a part-time workforce should monitor how the policy is affecting the brand image. If it starts to negatively affect the image and you don’t plan to back down from the decision, you should get your PR team or marketing team to attempt to frame the conversation in a slightly better manner.

Employee Efficiency and Quality of Performance.

Too many part-time employees could affect a store’s ability to provide quality service. After switching to a part-time employment strategy, Walmart found that they did not have enough experienced full-time employees to stock shelves and provide good customer service.

Too many part-time employees could affect a store’s ability to provide quality service. After switching to a part-time employment strategy, Walmart found that they did not have enough experienced full-time employees to stock shelves and provide good customer service.

The staffing problems led to a decrease in customer satisfaction and a decrease in sales. Good customer relationship management relies on a well-rounded team. IT, management, customer service, and salespeople must all be working at peak performance.

All companies who utilize a part-time workforce should monitor whether or not their employees’ performance is where it should be. If it’s not, it might be time to increase the number of full-time employees.

Utilizing part-time employees could be a solid way to eliminate costly healthcare costs for employees business owners cannot afford, but the strategy has a large pool of potential problems that employers will need to keep an eye on as they implement it. If the benefits of employing part-time employees do not outweigh the problems that arise, companies might want to rethink their employment strategy.

 


 

Samantha Stauf

Samantha Stauf

Samantha Stauf works in marketing. She writes career and business articles to help professionals navigate the American workplace. She enjoys digging through the IRS tax code a little too much. You can find her utilizing on twitter with the Twitter Handle @Samstauf.

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