SOUTHERN CALIFORNIA CAREERS / PART-TIME CAREERS : Aspiring to Work Less? Try On a Budget for Part-Time Pay

By KATHY M. KRISTOF

Feb. 6, 1995 12 AM PT

TIMES STAFF WRITER

It took Erin Doyle less than 10 weeks to derail her mother’s career.

Nancy Doyle, an entertainment industry accountant, couldn’t fathom leaving her newborn in someone else’s care five days a week, 10 hours a day, as would be required if she kept her job.

While still on maternity leave, Doyle sketched out a new budget. She had serious financial conversations with her husband, Chris. They searched for alternate health insurance. And, late last month, Doyle broke the news to her boss: She was quitting and would look for part-time work so she would be better able to balance a career with the needs of her family.

While the decision to work less is often personally rewarding, it’s tough financially. Dropping back to part-time work not only cuts take-home pay, it pares--or eliminates--valuable benefits, such as medical coverage and life and disability insurance. It may also have long-term repercussions--such as lowering the employee’s eventual Social Security benefit or the amount saved toward retirement.

Determining exactly how much shifting to part-time work will cost is not simple.

There are no standard formulas for part-time professional work. Indeed, employers say part-time arrangements are worked out case by case, usually with the employee making a detailed proposal and the employer accepting, rejecting or modifying it. Some who go part-time lose nothing but a portion of their pay; others lose benefits and promotion opportunities as well.

The onus is on the workers to determine what they want, what they’re willing to give up and what they must retain in order to afford the part-time arrangement.

On average, how much you lose in employee benefits is largely determined by how many hours you will work, according to a just-completed study by Hewitt Associates, a management resource firm in Lincolnshire, Ill.

For example, 76% of the companies surveyed maintained medical insurance for employees working 30 or more hours a week, but only 62% provided that benefit to those working 20 to 29 hours weekly. Just 25% offered it to those working fewer than 20 hours a week.

It’s worth noting that many people can afford to lose some benefits. Two-income married couples, for example, often have overlapping medical coverage through their jobs. If one spouse loses that coverage, it won’t hurt an intact family.

However, some families, as well as individuals and unmarried couples, will need the benefits that are put at risk by the part-time arrangement. In these cases, you must consider what the benefit would cost if you were to buy it independently--and whether you would be able to buy it at all.

The issues concerning salary and retirement are far more straight forward.

Typically, employers will cut a professional’s pay in direct relation to the proposed decrease in hours. In other words, someone who wanted to scale back to 20 hours from 40 would see a 50% drop in pay, while a worker who shaved 10 hours off a 40-hour schedule would face a 25% pay cut.

Retirement contributions--and Social Security benefits--are also directly related to earnings. Workers should anticipate that their retirement income will fall with their income. However, if a part-time work arrangement is temporary, you’re likely to be able to make up the loss over time.

Specifically, most employee pension plans fall into one of two categories: defined benefit plans and defined contribution plans. With defined benefit plans, your employer promises a set benefit at retirement that’s based on your wages and years of service. Typically, if you retire or leave the job after you have become vested, your retirement stipend will equal a set percentage of your earnings over the last three to five years.

If you have been working an abbreviated schedule in one or all of those years, your retirement stipend obviously will be significantly smaller. If you go back to a full-time arrangement before you retire, the part-time years will hurt you less, but they’re still likely to have an impact. In effect, they’re likely to reduce your years of service counted in calculating your benefit. If you worked 20 hours a week in a company where 40 hours is the norm, for example, it may take you 20 years to accumulate the pension equivalent of 10 years of service. Not all plans work this way, but many do.

Meanwhile, the Social Security Administration will provide you with a fairly good estimate of how a part-time arrangement could affect your future Social Security payments. It’s worth mentioning that couples married longer than 10 years have a floor on the amount of that impact. That’s because the “stay-at-home spouse” can claim either the benefit he or she earned or 50% of the other spouse’s benefit--whichever is higher. In some cases, 50% of the full-time spouse’s benefit amounts to substantially more than what a part-time wage earner could draw.

If you wish to have the Social Security Administration estimate your future Social Security benefits, call (800) 772-1213. You’ll be sent a form SSA-7004, which you fill out and return.

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Can You Afford to Work Part Time?

To decide, calculate how much you would lose in income and benefits compared to how much you would save on taxes, child care and other work-related expenses.

The Costs: Some employers offer benefits to part-time employees; others don’t. If benefits are lost or scaled back and must be replaced by the employee, that cost must be added to the lost wages to determine the overall cost of switching to part-time work.

Current employer-paid benefit: Health insurance Will these benefits continue under part-time arrangement: