Variable Hour
A new hire is a variable-hour employee when you cannot tell at the start date whether they will average 30 hours. For those hires you may use an initial measurement period of three to twelve months.
The three things to know.
How to Decide
The regulation looks at the facts at hire: whether the person is replacing a full-time or part-time employee, how hours of comparable positions have varied, whether the job was advertised as full-time, and how much the schedule can move.
The Initial Measurement Period
Three to twelve months, beginning on the start date or as late as the first day of the next calendar month. The employee’s average over that window sets their status.
Then Stability
An employee found full-time stays full-time for a stability period at least as long as the initial measurement period and no shorter than six months.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
A Catering Server Hired in June
A caterer hires a server on June 8. Event volume is seasonal and the schedule varies from 10 to 40 hours a week, so the employer cannot tell at hire whether she will average 30.
What the Rule Produces
The employer treats her as variable-hour and starts a 12-month initial measurement period on June 8. If she averages 30 hours a week or more over that window, she is full-time for the stability period that follows. She is also placed in the next standard measurement period.
Four steps to apply it.
1. Record the facts
Document why hours were uncertain at hire.
2. Start the initial period
Begin it on the start date or the first of the next month.
3. Total at the end
Compute the average when the window closes.
4. Place in the standard cycle
Add the hire to the next full standard measurement period.
Where it goes wrong. Calling a role variable-hour when the posting and schedule point to 30 hours or more.
The questions that come up next.
What if our roles genuinely vary a lot?
That is the case the initial measurement period was written for. Document why hours are uncertain for each role so the classification is defensible.
Can we call everyone variable-hour?
No. If you reasonably expect 30 hours at the start date, the hire is not variable-hour. Calling an expected full-time hire variable is a common mistake.
Does the hire also get tested again?
Yes. The employee is also tested on the first full standard measurement period after the start date, and the first stability period still holds in the meantime.
Can the initial period be shorter than 12 months?
Yes. It can be any length from three to twelve months.
What if hours become steady after hire?
The initial period still runs. Review the classification at the next cycle.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
Seasonal and Part-Time
Seasonal and part-time new hires can be measured over an initial measurement period, because their hours are not expected to reach 30 a week on a steady basis.
Align Measurement to Open Enrollment
A measurement period that ends a few weeks before open enrollment, followed by an administrative period, lets you total hours, notify employees and enroll them in one motion.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
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