Have you ever heard that business owners hire part-time workers so they don’t have to pay fringe benefits? Hiring part-time workers may be a good idea, but to avoid paying for fringe benefits is the wrong reason. Challenge anyone who makes this assertion. If the amount of work really doesn’t justify paying for a full-time worker, there are two good alternatives: hire a part-time worker or engage a contract service. As long as the amount paid for the work being done is less than what a full-time worker would cost, either alternative may be superior.
Hiring a part-timer to avoid paying for fringe benefits is a fallacy, besides it’s also not economically sensible. Whatever amount that is paid to a worker for work done goes to support the lifestyle of that worker. A part-time worker may need more than one job to support his/her standard of living. Certainly that should be obvious if the amount paid to the worker is small relative to his/her lifestyle, regardless of the hourly rate.
Payments for fringe benefits are generally worth more than $1.50 in retail value for every $1 spent by the business. This is a bargain that really isn’t too good to be true. Traditional “benefits” are retirement savings, health and life insurance and other medical or child-care expense payment programs. With a “Section 125” cafeteria plan, money can be allocated by an employer to be spent for a wide variety of purposes, individually chosen by each employee. For an employer to give an employee $1 of spending power, the employer must deposit more than 30 cents in taxes (federal income tax withholding – usually at least 15%, FICA and medicare – 15.3%, Federal and State Unemployment taxes – more) and pay for workers comp insurance, generally based on gross wages, excluding payments for “benefits.” In addition, by buying “benefits” in bulk, the employer usually pays a “wholesale” (lower) price, less than what the worker would pay for buying the same item as an individual consumer (if the item were even available).
If the object is to get the most value for money spent, fringe benefits are bargains.