Whether you take on full- or part-time employees or a combination of both depends largely on the needs of your business and cash flow levels. Full-time employees tend to be more fully invested, but they also cost more in compensation and benefits. But part-timers tend to have higher turnover, which carry their own costs. Regardless of the type of employees you have, if they’re all treated as team players and rewarded for their efforts, then you will have a happier and more committed work force.
Definitions of full-time and part-time vary
While the Fair Labor Standards Act (FLSA) does not stipulate what’s full- vs. part-time employment, the U.S. Department of Labor has generally defined full-time as more than 35 hours or more per week and part time as less than 35 hours per week. But it has generally been left up to the employer to determine the number of hours that constitutes full and part time status at their individual place of business. However, beginning in 2014, the Patient Protection and Affordable Care Act (PPACA) (often referred to as ObamaCare) defines a full-time employee as an individual who works 30 hours or more per week or 130 hours per month. So, depending on the size of your business and whether you already offer health insurance to full-time employees, you may have to adjust the hours and/or status of your current employees and/or adjust the hiring practices of future employees.
Consider hiring the right candidate first, then figure out time commitment
Ira S. Wolfe has employed full- and part-time workers both while running a family dental practice from the late 1970s to the mid-1990s and as president of Success Performance Solutions, a provider of employment testing and applicant tracking software for small and medium sized businesses, since 1996.
“Hiring the most qualified person should be the top priority,” explains Wolfe. “Insisting on full-time or a set number of hours may preclude you from finding that person.” At his dental practice, Wolfe’s part-time hygienists typically included working mothers and students. As long as there were a set number of people in the office, he left it up to his employees to work out scheduling and coverage with each other. “I trusted my employees with a flexible work schedule and it worked,” notes Wolfe, who returned to the same arrangement in his subsequent company. Wolfe has one full- and one part-time employee at his consulting business, which went virtual in 2008 and now has employees in three states. “I’ve had very low turnover in my businesses,” Wolfe points out.
While Wolfe’s part-time employees haven’t all received the same benefits as full-time employees, he has offered them benefits. “Part-time employees should not be treated as second-class citizens,” cautions Wolfe. Employees at his dental practice that worked a minimum of 1,000 hours annually were offered a retirement plan, and all part-timers are pro rated for holiday pay and vacation/sick days and offered performance and non-performance-based year-end bonuses. He further cautions against hiring part-time employees to save on health insurance and retirement benefits. “While it’s a cost, it could be a competitive advantage over businesses that don’t offer such benefits, as it’s a reason to stay,” he notes. According to a study by the Center for American Progress, it typically costs roughly 20 percent of a worker’s annual salary to find their replacement, which is often less than the added costs of health insurance. And depending on the industry and skill set required, it could end up costing a business even more in training time and lost production.
Of course, not every small business owner can afford to offer health or retirement plans to their employees. Leanne Carlson, senior consultant with LivingHR, which offers human resource services to small and medium-sized businesses, instead suggests adopting the concept of “total rewards,” which includes flexible scheduling, working remotely, incentive and wellness programs, and employee participation in decision making. “Such little-to-no cost benefits make employees feel valued.”
Tactics for bringing new hires on board effectively
Mitchell Weiss, adjunct professor of finance and board member of the University of Hartford’s Barney School of Business notes: “You should not bring on staff until you consistently have enough business to keep your employees busy.” Weiss, who is also a principal of M.D. Weiss LLC, a consulting firm to the financial services industry and small to mid-sized businesses, recommends streamlining processes before bringing on new staff. While small businesses tend to have flatter organizational structures, sometimes it’s just a matter of redistributing the work flow among current employees.
“Having ‘working’ managers and executives has a profound motivational effect on workplace culture,” Weiss points out. “If the demand is there, look to bring on someone part time with the possibility of taking on more hours or transitioning to full time if business picks up even more.”
Run the numbers to understand the financial implications of hiring
Similarly, Carlson cautions against hiring full or part time without financial planning. “There are liability costs like worker’s compensation and unemployment and disability insurance to consider as well as compliance with regulations concerning record keeping and hiring practices,” notes Carlson. “You need to make sure you have enough cash flow to grow or at least break even.”
For his part, Wolfe follows a formula to help him determine whether he can bring on full- or part-time employee. “If I hire someone for $20,000, I need to generate $40,000 to break even at a 50-percent margin,” he explains. “While hiring should not be based entirely on numbers, there’s got to be a balance between staffing costs and revenue.” Your business will suffer if it tilts to heavily one way or the other.
Think about creative alternatives: contractors, freelancers, and trial periods
Dana Marlowe, principal partner at Silver Springs, Maryland-based Accessibilities Partners, a consulting service that helps government agencies and contractors to ensure compliance with disability laws, has taken a results-driven approach to staffing. “Rather than keeping within the confines of full-time and part-time, my business has had success with people defining their own status,” she explains. As the work is largely project based, Marlowe and her team can project how many full- and part-time employees and 1099s (independent contractors) will be needed. “All the contracts have been signed, so there’s no concern of any slowdown,” notes Marlowe. With long-term, multi-year contracts, they tend to bring on full-time help, depending on the skill set and nature of the work required, and independent freelancers for those shorter term projects if no one is available in house.
Because Accessibilities Partners follows a remote business model, they’ve been able to tap into an often overlooked pool of qualified workers. “Many of our employees who are technological testers and consultants are people with disabilities, which makes travel and communication difficult in a traditional office setting.” This has allowed the company to hire people from all over the country. “We believe in life/work balance,” says Marlowe. “As long as the work gets done on time and on budget, it doesn’t matter what time emails are sent.” This flexible scheduling allows her employees to attend to medical and family needs during “normal” business hours.
Chris King, managing partner of Jupiter, Florida-based Hometown Bridges, LLC, which offers in-class mobile sports education and nutrition programs, has followed a “try it before you buy it” approach to hiring since launching a side business two years ago. After a year of development and four months of testing his product, he brought on a 1099 subcontractor in September 2011. By year’s end, he had secured accounts with six schools. “If I wanted to take on more schools, I knew I needed more help to allow for that growth.” After 60 days, the subcontractor transitioned to full time. Meanwhile, King remained at his full-time job until his new venture was bringing in enough revenue to be viable. His full-time market manager now oversees anywhere from three to six part-time teachers working in 25 schools in Palm Beach County. King has also hired another full-time market manager to handle new accounts in another county and plans to expand into a third market by March 2013. “I will continue to bring on employees based on need and evaluate if I have the volume/finances to keep them on after their contracts are up.”
Not only did this save King money in terms of tax liabilities, it’s like a trial run to see if the person will be a good fit for the company. “It’s a built-in, no-stress exit strategy,” he explains. “While people like the idea of working with kids, not everyone has the knack for it.” King has let go a few 1099 employees because they weren’t interacting with the children naturally or picking up the curriculum. Additionally, one freelancer opted out after her contract period was up. “That’s exactly what I want to happen,” says King. “It’s the ultimate quality control.”
Disclaimer: The opinions expressed are solely those of the author and interviewees. You should consult a qualified HR professional to assist you in developing and implementing sound personnel policies and practices.