Four-Day Workweeks and Benefits Eligibility: What Employers Need to Know About Compliance

Four-day workweeks are getting more attention as employers look for ways to improve flexibility, retention, and productivity. But from a benefits and compliance standpoint, the key issue is not the number of days worked. It is how many hours employees work, how the schedule is structured, and how eligibility rules are written in the plan documents.

That distinction matters because a four-day schedule can take very different forms. One model is a compressed schedule, such as four 10-hour days, where total weekly hours stay the same. Another is a reduced-hours schedule, such as four 8-hour days, where employees move from 40 hours to 32. Those two arrangements can lead to very different results for health coverage, retirement eligibility, leave rights, and wage-and-hour compliance.

Four-Day Workweeks Do Not Automatically Change Benefits Eligibility

A common mistake is assuming that a four-day workweek automatically makes an employee part-time for benefits purposes. In reality, employers usually need to look at the governing rule for each benefit. For ACA employer shared responsibility, the IRS defines a full-time employee as someone averaging at least 30 hours of service per week, or 130 hours in a calendar month. That means many employees on four-day schedules will still be full-time if they continue working at least 30 hours weekly.

For ERISA-covered plans more broadly, employers have flexibility in how they define eligibility, but they still need to follow the written plan terms and provide participants with clear plan information. If a medical, dental, life, disability, or other welfare plan defines eligibility by a certain class of employee or by a minimum number of scheduled hours, the employer needs to administer that rule consistently and communicate any changes properly.

Compressed Schedules vs. Reduced-Hour Schedules

The compliance analysis starts with the schedule design. If an employer adopts four 10-hour days, the employee is still generally working 40 hours per week. In that case, ACA health coverage eligibility may not change at all, and other benefits tied to full-time status often stay intact.

If the employer instead moves employees to four 8-hour days, the employee may now work 32 hours weekly. That is still above the ACA’s 30-hour full-time threshold, so an applicable large employer may still need to offer coverage to avoid potential penalties. But if the employer’s own plan documents define “full-time” as 35, 37.5, or 40 hours, other benefits could be affected unless the plan is amended.

This is why employers should not assume that a scheduling change and a benefits change are the same thing. They may overlap, but they are not automatically aligned.

ACA Health Coverage Is One of the First Compliance Checks

For applicable large employers, the ACA is often the first compliance issue to review. The IRS says full-time status for employer shared responsibility purposes is based on hours of service, using either the monthly measurement method or the look-back measurement method. The critical threshold remains 30 hours per week or 130 hours per month.

That means a four-day schedule does not necessarily reduce ACA obligations. A 32-hour employee may still be ACA full-time. Even if the employer internally labels that employee “part-time,” the ACA analysis is based on hours, not label alone.

Employers also need to think about variable-hour employees. If a four-day model changes staffing patterns, shift coverage, or overtime usage, average hours may shift in ways that affect measurement-period calculations. That is especially important when a business is piloting alternative schedules in one department but not another.

Wage-and-Hour Rules Can Complicate a Four-Day Model

Benefits eligibility is only part of the picture. A compressed four-day schedule can also raise overtime issues. Under the FLSA, nonexempt employees generally must receive overtime for hours worked over 40 in a workweek. Federal law does not require overtime merely because an employee works more than eight hours in a day, but it does require overtime once the employee exceeds 40 hours in the workweek.

That means a four 10s schedule can work under federal law without daily overtime, as long as weekly overtime rules are followed. But state law can be stricter. California, for example, has daily overtime rules and special alternative workweek requirements under its wage orders. Employers using compressed schedules across multiple states should review state-specific wage-and-hour rules before assuming a federal-only analysis is enough.

Retirement Plan Eligibility May Be Affected Differently

Retirement plan eligibility often follows different service rules than health coverage. The IRS explains that a traditional 401(k) plan generally may require up to one year of service for eligibility, and a year of service is usually tied to hours worked. The DOL also notes that part-time employees may be eligible if they work at least 1,000 hours per year.

That means an employee on a four-day schedule may remain eligible for retirement benefits even if their weekly hours decline, especially if they still reach the required annual hours threshold. In addition, SECURE and SECURE 2.0 expanded long-term part-time participation rules for salary deferrals in 401(k) plans. IRS materials state that for plan years beginning after December 31, 2024, certain long-term part-time employees can qualify after two consecutive 12-month periods with at least 500 hours of service in each period.

For employers, the takeaway is straightforward: a four-day workweek may affect medical, retirement, and other benefits in different ways, because each benefit may have its own eligibility framework.

Leave Eligibility Can Shift When Hours Drop

Alternative schedules can also affect leave compliance. Under the FMLA, eligible employees must have worked for the employer for at least 12 months and completed at least 1,250 hours of service during the prior 12 months. The DOL also states that only hours actually worked count toward that 1,250-hour threshold. Paid leave and unpaid leave generally do not count.

This means a reduced-hours four-day schedule could eventually affect FMLA eligibility for some employees, especially if they were already near the threshold. A compressed 40-hour schedule is less likely to create that issue than a 32-hour schedule. Employers should also remember that if an employee is on a modified schedule as a reasonable accommodation, ADA obligations still apply, including equal access to benefits and privileges of employment.

Plan Documents and Communication Matter

One of the biggest compliance risks is administrative inconsistency. If the employer changes schedules but does not review SPDs, plan documents, payroll coding, eligibility feeds, and handbook language, mistakes can follow. ERISA requires plans to provide participants with important information about plan features, and the DOL’s reporting and disclosure guide highlights the importance of SPDs and summaries of material modifications when plan terms change.

In practice, that means employers should confirm:

• how each plan defines full-time, part-time, or eligible classes

• whether a four-day schedule changes scheduled hours or only days worked

• whether payroll and benefits systems use the same eligibility logic

• whether any amendment, SPD update, or employee notice is required

Best Practices for Employers Considering a Four-Day Schedule

The safest approach is to treat a four-day workweek as a cross-functional compliance project, not just a scheduling change. HR, benefits, payroll, legal, and plan vendors should all review the design before rollout. That review should cover ACA full-time status, wage-and-hour rules, retirement plan service rules, leave eligibility, accommodation issues, and written plan terms.

Employers should also separate two questions: “What schedule do we want?” and “Which benefits rules attach to that schedule?” Keeping those questions distinct can prevent avoidable errors.

Final Thoughts

A four-day workweek can be attractive from a talent and culture standpoint, but benefits eligibility does not adjust automatically just because the calendar looks different. Compliance usually turns on hours worked, plan language, service-crediting rules, and state law requirements.

For employers, the real issue is not whether a four-day workweek is allowed. It is whether health coverage, retirement plan participation, overtime pay, leave eligibility, and employee communications have all been reviewed carefully before the change takes effect.

Taylor Benefits Insurance Agency helps employers evaluate benefits strategy alongside changing workforce policies, including eligibility structures, plan communication, and compliance-sensitive schedule changes.