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Nothing Partial About These Benefits

HR Magazine, August 2003Companies that offer full-time benefits to part-time workers get paid back in better recuiting and retention.

Christine Virelli’s husband was seriously injured in a car accident in 1996, and, two years later, when he was still unable to hold a job, she hit the pavement to look for part-time work. “I had three kids in school and couldn’t work full time,” she explains.

Virelli turned down several offers before taking a job as a package sorter at the United Parcel Service (UPS) hub at Philadelphia International Airport. The UPS job was part time, she says, but more important, after six months she became eligible for full family health care coverage at no cost to her. “I would have worked here for free just for the medical insurance,” she says.

Although Virelli’s experience—receiving benefits as a part-time employee—is still the exception rather than the rule, it could become more prevalent.

Part-timers’ share of the workforce has been growing and is likely to continue growing. According to the U.S. Bureau of Labor Statistics, workers putting in fewer than 35 hours per week accounted for 23.9 percent of the workforce in 2001, up from 18.3 percent in 1996.

Competition for part-time employees is already fierce among consumer-driven organizations, which depend heavily on such workers. Companies such as Atlanta-based UPS; the Starbucks coffee company, headquartered in Seattle; and the Wegmans Food Markets chain, based in Rochester, N.Y., are among the firms already known for giving their part-time workers generous benefits packages, including health insurance.

As the share of part-time workers grows—and particularly if baby boomers continue to work part-time into their retirement years, as is predicted—offering benefits to part-timers could become a more widespread tool for attracting and retaining quality workers.

The Company Interest

Reasons abound for offering benefits to part-timers, and foremost among them is attracting top-notch workers. “If you give part-time workers a better deal, you’ll get better workers,” says Chris Tilly, a professor of regional economic and social development at the University of Massachusetts in Lowell.

Companies that offer their part-timers benefits, says Tilly, become employers of choice for quality workers, who in turn help the companies distinguish themselves through good service. Such companies, Tilly says, “are going ‘up market’ and charging more for better service. And you provide good service by having long-term employees.”

Wegmans, which has 65 supermarkets in three states, prides itself on customer service and taking care of employees. Two-thirds of Wegmans’ 30,000 employees are part-timers who receive benefits—including company-paid health insurance—largely, the company says, to attract and keep good workers for peak periods. But the company is not simply weighing costs, says Karen Shadders, vice president of people at Wegmans. “We would have stopped offering free health insurance [to part-timers] a long time ago if we tried to justify the costs.”

Employers in low unemployment areas, which still exist despite the rising national unemployment rate, are particularly keen on setting themselves apart. Says Teri Thorsen, director of human resources at North Dakota State University in Fargo: “We are a public-sector nonprofit [organization], and we often don’t have the money to pay competitive salaries, so benefits are a key component to our compensation package.”

About 10 percent of North Dakota State’s 2,200 employees work fewer than 40 hours per week. “While there are many service jobs in this area, few give part-timers benefits,” Thorsen says.

Another enterprise that gives benefits to part-time employees—2,000 on a payroll of more than 11,000—is the Foxwoods Resort Casino in Mashantucket, Conn., owned by the Mashantucket Pequots Native American tribe. “The tribe has always been generous,” says Joann Frank, a senior vice president of human resources at the casino. “They want to be good employers and make sure that their employees’ basic needs are met.”

Like other employers, Foxwoods uses benefits as an incentive to attract good workers for part-time jobs paying $8 to $12 an hour, Frank says. Foxwoods’ competition for part-time workers includes the Mohegan Sun Casino, submarine builder Electric Boat and a Pfizer pharmaceutical company research center.

Frank says offering part-timers benefits—particularly health insurance—helps Foxwoods tap certain segments of the labor pool, such as single parents, self-employed individuals and their spouses, and older workers who either haven’t reached the eligibility age for Medicare or are covered by Medicare but want supplemental benefits.

Benefits for part-timers “is a huge draw for people,” says Virginia Martick, a part-time employee at Foxwoods’ Two Trees Inn and a member of the Foxwoods Employee Group Council, a sounding board for employees to bring issues and concerns to the tribe. Martick tells of an older part-time worker at the hotel who works primarily for the medical benefits.

Furthermore, Martick says, a significant percentage of part-timers at Foxwoods want full-time jobs, and if the part-time positions did not include benefits, many would not make the trade-off of fewer hours. “Foxwoods would have a much harder time getting people to work part time if not for the benefits,” she says.

After They’re Hired

Once part-time employees are on board, benefits become important for retention, say employers. In fact, studies typically show that offering benefits increases retention for part-timers, says Tilly.

Wegmans executive Shadders notes that although turnover in the supermarket industry is about 100 percent, the turnover rate at Wegmans is 38 percent. Says Frank: “It’s expensive to hire and train new employees, so we place a lot of emphasis on keeping them. And providing benefits is one way to keep them.”

Anne Kaiser, a benefits administration manager at Freddie Mac, a federal mortgage financing company based in McLean, Va., agrees: “Providing benefits to part-timers helped us to retain employees who would have left because of work/life balance issues. It’s proven to be a good retention tool.” About 150 of Freddie Mac’s 4,200 employees work part time.

Says Steve Nord, corporate compensation and benefits manager at UPS in Atlanta: “Offering benefits to part-timers allows us to bring employees into the corporation and turn them into long-term employees—it’s definitely a retention strategy.” Half of UPS’s 320,000 U.S. employees are part-time workers, and they need to have a thorough knowledge of their jobs to move packages quickly and efficiently through the UPS system, Nord says. “To the extent we can keep turnover low, it’s better for the customer.”

Providing benefits also promotes loyalty. “I can’t leave UPS,” says Virelli. “They’ve done so much for me that I can’t imagine not working for them.” Virelli, now a part-time supervisor, was a ninth-grade dropout and a housewife for 16 years when she started at UPS. The company paid her costs to get her general equivalency diploma and is now paying for her to attend college.

“Someday I want to work in the HR department here at UPS,” Virelli adds. “UPS helped me turn my life around, and I’m still growing. My main goal is that I want to grow in the company.”

Doing the Math

Although health insurance coverage is often the centerpiece of a benefits plan for part-timers, employers generally offer a smorgasbord of benefits. Most companies charge part-timers and full-timers the same for health insurance. Other benefits, such as retirement plans and paid vacation time, are often based on salary or hours worked.

Wegmans employees are eligible for free health coverage and for profit-sharing plan contributions if they work at least 17.5 hours per week. Part-timers also participate in the 401(k) plan, in which the company matches 50 cents of each dollar contributed by the employee up to 6 percent of pay. Vacation pay is based on the number of hours worked, says Shadders, and part-timers also can participate in the dependent care reimbursement plan.

Foxwoods has set the threshold for a full-time week at 30 hours. Many of its earliest recruits were former union employees, so it would have been difficult to attract them without benefits, says Frank. Foxwoods also did not want to give those previously unionized workers a reason to form a union, she says.

Foxwoods employees who work 20 to 30 hours a week have access to individual health care insurance for $7 per week, $500 in tuition reimbursement per year, $100 a month in child care expenses, a dollar-for-dollar match of up to 3 percent of compensation in the 401(k) plan, which is immediately vested. They’re also eligible for paid holidays and free prescriptions at an onsite pharmacy.

UPS’s unionized part-timers get free health insurance, while nonunion part-timers pay approximately $50 a month for health care. Nonunion part-timers who participate in the 401(k) plan receive an immediately vested 100 percent match on the first 3 percent of compensation contributed, and both union and nonunion part-timers are covered by defined benefit retirement plans.

Furthermore, says Nord, part-timers at UPS—whether they are union or nonunion employees—receive paid time off and can be eligible for tuition assistance, although the levels of both benefits depend on various employment factors such as job function and seniority.

Freddie Mac employees working at least 20 hours a week get health care coverage, including medical, dental and vision, at the same rate as full-timers. Part-timers also can contribute to the 401(k) plan, the dependent care spending account and the stock purchase plan, and they receive paid vacation and access to the on-site gym and concierge services.

At North Dakota State, benefits such as retirement, long-term disability and life insurance are based on salary. Full-time employees receive 80 hours of paid vacation a year, part-timers working 30 hours a week get 60 hours and those working 20 hours a week get 40 hours.

As generous as some employers may be with benefits for part-timers, however, there are limits. Almost all employers set a minimum number of hours worked to become eligible for benefits.

One employer offered benefits to workers who put in just a few hours a week but is now changing its policy. Starting next March, Minneapolis-based Target Corp., with 245,000 employees, is dropping paid vacation time and health care coverage for store employees whose average workweek does not exceed 20 hours, says a spokesperson. The move is aimed at keeping the company competitive, says the spokesperson, who declined to discuss the plan’s specifics or the number of employees likely to be affected by it.

Looking Ahead

Companies that offer benefits to part-time workers are likely to be those whose business structures depend on large numbers of high-quality, long-term employees willing to work for abbreviated stretches of time.

For example, UPS started to offer part-timers benefits in the early 1970s as part of an overall employment strategy when it expanded services into time-sensitive deliveries. Large numbers of long-term, part-time workers are needed, says Nord, because UPS has a nationwide four-hour window when packages are sorted and prepared for next-day delivery. “But once the packages leave the building,” he says, “there’s nothing to do.”

Similarly, Wegmans needs part-time workers at its busiest periods and finds single moms to be a good source, Shadders says. “It’s a win-win situation. We get staffing during difficult hours, and they get health insurance.”

And when North Dakota State adds programs, explains Thorsen, it creates a need for new staff members—but not for full-time employees. “We can still recruit top-quality people for part-time positions,” she says.

Moreover, providing benefits for employees who put in only half the time doesn’t seem to be a sore point among full-time employees. “The full-time employees don’t resent it,” says Kaiser of Freddie Mac. They realize, she explains, that those benefits will be there for them as well if they ever have to switch to part-time status.

Indeed, part-time status could become the norm for growing numbers of workers. Tilly says demographic changes will lead to labor shortages, and he adds that a growing portion of the workforce does not want to work full time.

Furthermore, Tilly says, some older baby boomers will be looking for part-time work with benefits because they are less likely than their predecessors to have retiree health benefits and defined-benefit pensions.

“In the long term,” he says, “I think more companies will give their part-time workers benefits.”

Elayne Robertson Demby is a freelance business writer in Weston, Conn.


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