Question

Compensation & Benefits

Case: Benefits for part-Time Workers

With just under 100 employees, Jackson, Smith, and Henderson CPA (JSH) is considered one of the fastest- growing certified public accounting (CPA) firms in the area. Alan Jones was recently hired as the director of human resources and has many challenges ahead of him as he works to formalize the human resource practices of the firm. As the benefit open to enrollment period is approaching quickly, his first job is to review the benefit offerings of the firm to ensure that JSH is competitive with other area firms. Beyond the legally required benefits, the firm currently offers a fairly basic benefit package including health care insurance, a 401 (k) plan, vacation days, and sick days. Currently, all employees are full-time, and all employees are eligible for benefits. However, two employees have recently requested part-time schedules. Further, in order to meet future unique staffing needs, the firm is considering hiring part-time workers in several departments, including CPA's. Therefore, Alan must make a recommendation to the company's board of directors on whether they should extend the benefits to part-time workers. A recent compensation survey of business in the local geographic area includes information about benefits. The survey reports that about 90 percent of companies in the area offer time-off benefits to part-time employees, only 40 percent offer health care insurance, and 15 percent offer a retirement savings plan. A national survey of CPA firms showed a different picture for part-time workers: 95 percent of firms reported time-off offerings, 75 percent offered health care insurance, and 67 percent offered retirement benefits to part-time workers. The job market for talented CPA's is competitive, and Alan knows that the firm will need to hire both full-time and part-time CPA's in the future. Alan's initial reaction is that the firm needs to offer all benefits to both full-time and part-time workers in order to be competitive with other CPA firms. However, the costs to do so are significant. The current benefits package is approximately 30 percent of the total compensation package for full-time workers. While time-off benefits and 401 (k) contributions for part-time workers would be pro-rated based on the number of hours each employee works, offering health care insurance is a fixed cost. That is, the firm must pay the same to cover a part-time worker as well as a full-time worker. As a result, benefit costs could potentially approach nearly 50 percent of the total compensation for part-time employees. Part of this cost could be the offset by asking part-time workers to pay a higher percentage of premium, but the cost would still be significant. Alan must balance recruiting needs against a tight budget, and he is concerned about the right path to take.

1. What are some factors that Alan should consider when determining whether to offer benefits to part-time workers?

2. Do you think the firm should offer benefits to part-time workers? If yes, should it offer paid time off, the 401 (k) plan, and health insurance? Or only one or two of the benefits? Explain your recommendation.

Answer 1

1. Alan should consider what JSH competitors offer to their part-time workers. As one of the fastest growing CPA firms the company is going to need to continue to employ top talent in their field, but not offering competitive benefits could hinder this. Additionally, he should consider the results of the two compensation survey reports, which showed 95% of CPA firms offer time-off to part-time employees, 75% offered healthcare, and 67% offered retirement benefits to part-time workers. Finally, Alan should consider the cost factor of offering benefits to part-time employees. As stated, healthcare insurance is a fixed cost and could raise total compensation for part-time employees to nearly 50%.

2I believe the firm should offer benefits to part-time employees, however there are options available when creating a benefit package for these employees. First, paid time-off should be incurred based on the hours worked. Additionally, I would recommend 401(k) contributions start after a certain amount of time on the job. Finally, I would recommend providing a fixed healthcare allowance to part-time employees every month. This would be cost effective for the employer and allow the employee to choose his or her own plan. An individual would be able to find affordable plans through different companies, and can receive lower monthly costs and deductibles based on income level. This option allows the company to offer healthcare benefits, remain competitive, but avoid raising costs regarding the compensation…...