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Getting total rewards right for part-time and gig workers is key to long-term sustainability

By Justin Dietz , Kenneth Kuk and Lesli Jennings | September 14, 2022

Alternative work arrangements like part-time and gig work can address the talent gap, but to be effective, you may need to revisit your total rewards strategies.
Talent|Total Rewards|Employee Engagement
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The labor participation rate in the U.S. has steadily declined for decades, caused by factors such as demographic shift and productivity enhancements. The COVID-19 pandemic caused a significant drop in labor participation, as many workers struggled with disruptions in their work and lives. This has coincided with a significant increase in labor demand across sectors as well as high inflation. Amid economic uncertainty, many organizations are exploring more flexible, creative and efficient ways to get work done.

Addressing the talent gap

Leading employers have started to address the talent gap with a more holistic work strategy that includes an intentional approach to hiring part-time employees and gig workers. Since July 2021, part-time work has grown in the U.S.

Alternative work arrangements such as part-time and gig work appeal to talent with different needs such as caregivers and students. Additionally, workers may opt for part-time or gig work ahead of retirement or to pursue other opportunities and avoid burnout. Alternative work arrangements also promote employee wellbeing equitably, allowing workers with different personal circumstances to attend to their work while acquiring new skills or fulfilling other commitments and interests outside of work.

The decision to introduce alternative work arrangements needs to also consider the significant implications to total rewards. For example:

  • Covering health and retirement benefits for part-time workers increases overall labor costs.
  • Pay structures will need to adapt to different work styles (e.g., shifts).
  • More creative approaches to career architectures may be needed because the conventional notion of career progression does not apply to task-based employment.

While it may be tempting to address these programmatic implications narrowly, organizations with a vision to enable their new work strategies with a holistic view on total rewards design will outperform competitors in the long run.

Total rewards can play a powerful role in driving the effectiveness of making alternative work arrangements more successful. However, a few questions about how alternative workers fit into your overall work strategy should be addressed first.

What is the best work strategy for your organization? Do you need part-time employees, gig workers or both?

Gig workers (e.g., the ridesharing employment model) have a different set of considerations than more traditional part-time workers. Gig employment provides more flexibility in schedule and workload while part-time work is traditionally a set schedule but with fewer hours than a full-time employee.

While the line between these two types of workers may blur as the workplace becomes more flexible (e.g., on-demand pay and technology to facilitate picking or trading shifts), it is important to clarify which employment type is best suited to achieve your business goals.

Will your part-time and gig work strategy be a stopgap for the current labor shortage or will it be a long-term competitive advantage?

Designing a long-term strategy with part-timers will have ramifications across other areas of your organization and should be carefully thought through. For example, designing a part-time shift around school hours may attract single parents but could require a rearrangement of a manufacturing process.

Your strategy with part-time workers may intertwine with other employment policies such as phased retirement. Employees close to retirement may consider part-time work as a smooth transition to retirement. If these connections are made purposefully and strategically, part-time work may be a way to enhance the sharing of critical organizational knowledge and reduce labor costs and inefficiencies.

How much you rely on part-time and gig workers may vary by location depending on location-specific talent supply, especially for workers who must perform work onsite. In locations with shortages of talent with specific skill sets, investing more heavily in part-time and gig workers may help you bridge the talent gap more effectively than your competitors.

Leading organizations are also very aware that work strategies must adapt to changing market conditions to sustain competitive advantage.

How do the preferences of part-time and gig workers differ from full-time workers and how should you design total rewards around those preferences?

Our 2022 Global Benefits and Attitudes Survey found that flexible work arrangements (including choosing when to work) are key to talent attraction. Our research further indicates that when compared to full-time employees, part-time and gig workers place greater value on flexibility.

Benefit preferences vary significantly based on individual needs represented by different employment profiles. While full-time workers may appreciate childcare support more than part-time workers, part-time workers may prefer commuting benefits and a more generous healthcare plan because commuting and healthcare costs represent a larger portion of their income.

Employee listening and techniques such as conjoint analysis can help you to better understand:

  • How employees’ total rewards preferences vary by cohort and worker type
  • How total rewards can be optimized to improve wellbeing for all workers and to create an environment where all workers can be fully productive and thrive

Will your organization’s employee value proposition require a segmented investment approach for full-time employees versus other types of workers?

Optimized total rewards investments may be fundamentally different between full-time and part-time workers. Some program changes, such as extending eligibility on medical coverage, should be reviewed based on the current state for part-time coverage.

  • If not offered today, is it because employees are getting coverage through a spouse or parent (for employees under 26) and would not find value in extended coverage?
  • Would offering a plan eliminate the option for Affordable Care Act subsidies and make coverage more expensive to an employee based on the contributions that might be charged?
  • Or will medical coverage be the key preference for a future part-time phased retirement population?

The answers to these questions vary for different worker populations. Even within the part-time group, there may be different considerations between salaried and hourly workers.

On the other hand, while leave benefits such as additional paid time off (PTO) days or parental leave may not incur direct cost to the business, it will impact productivity and require other employees to perform the work while those on leave are out (and still being paid). For some part-time workers, unpaid leave benefits may have little benefit to wellbeing, as they may only get paid for hours worked.

You may also want to consider enriching total rewards offerings for part-time workers as an incentive to shift your workforce profile to better align with your work strategy. You may be able to better attract part-time workers by making further investments in rewards such as:

  • Benefits supporting flexibility at work (i.e., backup childcare, transportation discounts)
  • Continuing education support
  • Discounts on company merchandise
  • Day-to-day perks like subsidies on gym memberships or streaming services

Despite these investments, your labor costs may still be reduced overall with a more optimized workforce profile.

Other total rewards investments related to part-time workers may be driven by legislative actions such as SECURE Act 2.0. If signed into law, it would make part-time employees eligible to participate in employer-sponsored defined contribution plans after they have completed 500 hours of service for two consecutive years. Such an arrangement may be more generous than your current retirement plan, significantly increasing benefits’ costs.

Closing the talent gap and building a sustainable business

A more holistic work strategy has shifted from a competitive advantage to a necessity. Organizations without a plan to supplement full-time employees with part-time and gig workers will struggle to compete in the current tight labor market. Amid economic uncertainty, a diversified workforce portfolio enables you to be more resilient when cost pressures arise.

We encourage total rewards and HR leaders to consider how part-time and gig workers should be more strategically incorporated into the workforce and how a modernized work strategy can be enhanced by equitable total rewards that address the physical, mental, social and financial wellbeing of workers with different needs.

Authors

Senior Director, Health and Benefits

Senior Director, Work and Rewards (Washington, D.C.)

Senior Director, North America Leader for Work and Rewards

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