Considering Part-Time Hires Under Obamacare? Next year, certain companies that don't offer health benefits will pay stiff fines, but switching to part-time hires doesn't always make sense.
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Starting in 2014, some small companies will have to provide health insurance for their employees, or face some stiff consequences under the new health reform law, commonly known as "Obamacare." Specifically, any company with 50 or more full-time workers that does not provide health benefits could face fines of between $2,000 and $3,000 per employee for all but 30 of its full-timers. Even part-timers who work 30-hour-a-week jobs are counted toward that final tally of 50.
To skirt the 50-employee rule, small companies might consider moving away from full-time workforces. Already, some advisers say they're seeing that happen. "Small-business owners are concerned about the mandate for health-care coverage, or the fine they would be charged, so they're hiring part-time workers and keeping them for less than 30 hours a week," says Brian Miller, chief operating officer of AdviCoach and The Entrepreneur Source, Southbury, Conn.-based companies that advise small businesses.
According to a Gallup poll released in March, the proportion of the U.S. workforce comprising part-timers hit 20.6 percent in February—a slight 1.5% percentage point increase from 2010.
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When does a part-time staff make sense? For some types of companies, it can be a good strategy to hand over non-core functions to part-timers, says Nancy Mobley, founder and CEO of Insight Performance, a human-resources consulting firm in Dedham, Mass. A high-tech, venture-backed company might hire part-time legal experts, bookkeepers or HR people, says Mobley. "It's a way to focus on their core business without having to worry about the overhead."
Mobley warns, however, that part-timers can present obstacles to some young, growing companies. "Part-timers are not always available because they're on this rigid schedule," she says. "Say you have people who don't work on Thursdays and Fridays. Things can change exponentially during that period of time. It can become very difficult to communicate to your workforce."
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A company's ability to succeed with part-timers may also hinge on its culture. Service-oriented companies, for example, may struggle to maintain good customer relations if the faces behind the counter or the voices on the other end of the phone line are constantly changing.
Some businesses have found that downshifting existing full-time staff to part-time hours can have drawbacks. Last year, Orlando, Fla.-based Darden Restaurants—owner of Olive Garden, Red Lobster and other eateries—experimented with reduced hours at some of its restaurants. The company's executives said they were looking for a way to handle rising health-care costs. But on December 6, 2012, Darden halted the experiment and announced that none of its full-time employees would see their hours cut as a result of health-care reform. In a statement, Darden CEO Clarence Otis indicated that "guest satisfaction and employee engagement" were negatively impacted by the move to part-time hours, and that "we have always had a significant number of full-time employees and they are integral to our success."
Switching to a largely part-time structure can present practical challenges, too. "Where do you find workers who can survive on 29 hours a week? And can you change your work shifts?" says Chris Rivard, national practice leader for the health-care consulting group of accounting firm Moss Adams in Spokane, Wash. "I've had the conversation with a lot of businesses, and very few of them think they can accomplish it."
Indeed, one risk with hiring part-timers is that they may bolt as soon as they find full-time jobs—with health benefits. That's why Miller advises entrepreneurs who are assembling part-time workforces to think about the long-term evolution of those positions. "If you're going to be using part-time workers you need to provide some opportunity for people to grow into full-time jobs," Miller says. "It will mitigate the loyalty issues if you have some sort of path for them."
