A Guide to Moving an Employee from Full Time to Part Time

If you’d like to switch an employee from full time to part time for economic reasons, you’re not alone.

As of October 2021, around 4.4 million people were employed part time for economic reasons, unchanged from 4.4 million in February 2020 — according to the Bureau of Labor Statistics (BLS). These individuals worked part time involuntarily, due to their hours being reduced or not being able to find a full-time job.

Despite the large number of employees working part time involuntarily, many employees voluntarily (or choose to) work part time. Regardless of the reason for the switch, an employer has considerable grounds to cover when moving an employee from full time to part time.

This guide is designed to help you navigate the transition. It includes:

• How switching to part time can benefit the employee
• Part-time work as a retention tool
• What constitutes part-time hours
• Financial considerations when making the switch
• How to handle benefits during the transition
• Notice requirements

How switching to part time can benefit the employee

An employee may voluntarily decide to switch from full time to part time because of:

• Family obligations. If they have small children, elderly parents, or a disabled family member, they may want to take on additional caretaker responsibilities.
• Health improvement or medical reasons. Studies show that 80% of workers undergo stress at work. Also, 76% of employees experience burnout. To lower their stress level and avoid exhaustion, the employee may opt for a lighter work schedule. Or, they may have a medical condition that makes it difficult to work full time.
• Retirement age. Older people are working longer, but upon nearing or reaching retirement age, they may want to spend more time on leisure activities or with family. To strike a balance between work and play, some choose part-time employment.
• Educational pursuits. For example, the employee has decided to pursue a higher education degree — and to attain it, they need to work fewer hours.
• Other professional or personal goals. For instance, the employee wants to work part time as an employee and partially as an independent contractor. Or, they have hobbies they’d like to take more seriously.

As stated earlier, part-time employment is often involuntary. Even then, there can be upsides for the employee. For example, they may prefer part-time employment over losing their job altogether. Because of the reduced work hours, the employee may qualify for unemployment benefits, which can help to plug the financial gap.

Part-time work as a retention tool

As the United States economy rebounds from the COVID-19 pandemic, employers are struggling to fill positions. For this reason, it’s critical to hold on to qualified employees. In fact, one study found that “Talent retention is the top employer concern in 2021, and 39 percent of companies believe at least one in five in their workforce are currently looking for new jobs at other companies.”

As previously mentioned, one way to retain employees is to offer them part-time work instead of laying them off. Depending on their situation and level of organizational commitment, they might choose to stay.

Keep in mind that conservative estimates put the cost of replacing an employee at around $15,000. You can avoid this cost burden plus minimize operational disruptions by switching an employee from full time to part time.

Note, as well, that flexible work options are becoming crucial to retention. In one survey, 46% of respondents cited part-time scheduling as their flexible work option of choice. By offering or agreeing to move an employee from full time to part time, you exhibit flexibility.

What constitutes part-time hours

It’s important to determine the number of hours that constitute “part-time employment” at your company.

The BLS defines part-time workers as “those who usually work fewer than 35 hours per week.” Those who work 35 hours or more are full time. However, these definitions are for statistical purposes; they are not legal definitions. Also, the Fair Labor Standards Act (FLSA) — which governs federal wage-and-hour laws — does not cover part-time employment.

Usually, it’s up to the employer to decide what represents full-time and part-time status within the company. This ultimately depends on the requirements for the position. That being said, part-time employment typically requires less than 30-35 hours per week.

Financial considerations when making the switch

Going from full time to part time generally means fewer job responsibilities. How employers should handle hourly wages or salary varies according to nonexempt or exempt status.

Nonexempt employee

Part-time employees are often classified as nonexempt, hourly — meaning they are eligible for overtime. These employees must receive no less than the federal or state minimum hourly wage, whichever is higher.

Other considerations:

• If the nature of the employee’s work will not change, you can keep the employee’s hourly pay rate the same. (The employee is more likely to stay if their hourly rate does not go down.) But if you’re moving the employee to a lower position, you can reduce their hourly rate — preferably to no less than the market rate for the position.
• A part-time employee can be nonexempt, salaried — meaning they are eligible for overtime, despite receiving a salary. Here, you can adjust the salary to reflect the diminished job responsibilities, but it cannot be less than the federal or state minimum hourly wage. The part-time salary can be based on a fixed number of work hours for the week, or a fluctuating workweek where the work hours vary from week to week.
• If a nonexempt hourly or salaried part-time employee works more than 40 hours in a workweek, you must pay them overtime.
• The FLSA’s fluctuating workweek method lets employers pay nonexempt salaried employees overtime at a lower rate, but it also comes with restrictions. Make sure you understand the pros and cons of fluctuating workweeks before applying it to nonexempt salaried part-time employees. Also, check state law because a few states limit or ban the use of fluctuating workweeks.

Exempt employee

Can you move a full-time exempt employee to part-time exempt status? The short answer is yes.

The long (FLSA) answer:

• So long as the employee receives at least $684 per week and their part-time duties classify as “exempt,” they can retain their exempt status — which excludes them from overtime,
• You can initially reduce the exempt employee’s salary provided the reduction is due to the employee being converted to part-time status. Thereafter, the employee’s salary (at least $684 per week) cannot be reduced, except in limited cases.
• Paying less than the minimum salary requirement will cause the exempt part-time employee to lose the exemption, rendering them nonexempt and eligible for overtime.

If you cannot justify paying an exempt part-time employee $684 or more per week, consider switching them to nonexempt, which enables you to pay a lower rate. Although this qualifies them for overtime, the chances of them working overtime as a part-time employee is likely nonexistent or minimal.

Note that some states have overtime exemption laws, which may differ from the FLSA.

How to handle benefits during the transition

This comes down to your policy on benefits for part-time employees plus applicable legal requirements.

Key considerations:

• More and more employers are offering benefits — such as health insurance and 401(k) — to part-time employees.
• Provided there is equal employment opportunity, you can have one set of benefits for full-time employees and one set for part-time employees, or none at all for part-time employees. Similarly, separate benefits can apply to exempt and nonexempt employees.
• Be very clear in your policy about the benefits rules (e.g., eligibility and accruals) for each category of employees.
• You can reduce a full-time employee’s benefits to match their new, part-time status — so long as other similarly situated employees are treated in the same way.
• Under the Affordable Care Act (ACA), applicable large employers must offer health coverage to employees who work at least 30 hours per week or 130 hours per month — or pay a penalty.
• Per the Employee Retirement Income Security Act (ERISA), employees who work at least 1,000 hours in a 12-month period (whether full time or part time) must be permitted to participate in the employer’s retirement plan.
• Under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, employers must allow long-term, part-time employees to contribute to the company’s 401(k) plan. Long-term part-time employees can start contributing in 2024, but their employers must start tracking their work hours in 2021.
• When a full-time employee returns from Family and Medical Leave Act (FMLA) leave, they must generally be reinstated to their old job or an equivalent position. Depending on the situation, the employer may be allowed to transfer the employee to a part-time position.

State and local laws

Remember to consult state and local laws for any mandatory benefits requirements. For example, part-time employees are normally eligible for workers’ compensation, and many states require paid sick leave for full-timers and part-timers. There may be provisions, as well, for unused vacation time.

Notice requirements

The state may require an employer to notify employees in advance of changes to their employment status, pay rate, or work schedule. So, before you switch an employee from full time to part time, check for any notice requirements.

Even if it’s not a legal requirement, it’s common courtesy to inform employees prior to changing their employment status, pay, benefits, or working conditions.

Understand the laws, and communicate with your workers

You must consider numerous factors when moving an employee from full time to part time. You can achieve a successful transition by understanding the legal and non-legal aspects of part-time employment and communicating seamlessly with the employee.