Could annualised hours solve the precarious employment issue?

Kevin White, Managing Director at Working Time Solutions, explains why those in HR tasked with tackling strategic workforce challenges should reappraise Annualised Hours.

The volatile demand patterns created by 24/7 markets has seen many employers’ approach to resourcing become reliant on zero and short hours contracts and agency models to provide flexibility and responsiveness.

Yet, these forms of ‘precarious employment’ are the subject of increasing media and Government scrutiny…right at a time when the uncertainty created by Brexit requires organisations to be more flexible, productive, competitive and resilient.

In this perfect storm, HR professionals should examine whether their resourcing models are fit for purpose, reputationally sound and whether they can respond quickly and effectively to change.

As organisations look for innovative and viable solutions, Annualised Hours is increasingly coming to the fore.

This established method for organising working time has the potential to deliver significant strategic, financial and operational benefits whilst creating full-time jobs and supporting employee wellbeing.

However, whilst the model is proven and highly relevant, it is often misunderstood and regularly finds itself on the ‘too challenging’ pile.


The concept

Annualised Hours was initially an experimental labour model developed in Scandinavia during the 1970s as a method to limit the use of overtime and to increase leisure opportunities for the workforce.

It arrived in the UK in the early 1980s but gained a less than favourable reputation in the 1990s when some businesses used it as part of brutal cost-cutting programmes.

Three decades on and organisations of all shapes and sizes are looking again at Annualised Hours to overcome inefficient, inflexible or ethically questionable working practices.

Put simply, Annualised Hours systems calculate employees’ working time and pay over the course of a standard year, rather than by the week.

Expressing an ‘hours per week’ contract in terms of the equivalent number of hours over a year provides much more flexibility around when that labour resource can be utilised.

This enables truly responsive Demand-Led Rostering systems to be created using shift patterns that ensure exactly the right number of people are available at exactly the time they are needed.


The benefits

Many organisations have developed an unhealthy dependency on agency labour, zero hours contracts or overtime to ensure supply meets their demand profile.

Annualised Hours ensures demand is met mostly using the contracted hours of the core workforce, with shifts planned more accurately and resource deployed only when it is needed.

This simultaneously eliminates over-supply, which can lead to job losses, skills drain, and under-supply, which generates reliance on expensive temporary forms of labour.

Ensuring supply and demand remain aligned helps tackle a range of organisational issues around productivity, administration complexity, service levels and health and safety risks.

Crucially it also delivers many benefits for employees. Whilst hours worked can vary (as they are dictated by demand), a yearly salary is paid on a regular basis.

Savings made by reducing temporary labour costs can be re-invested in base wages, providing employees with higher guaranteed earnings and a more predictable income.

A well-administered system also helps promote work-life balance, reduce overworking, provide certainty of hours, adequate notice around working days and an equitable distribution of shift pattern types.

Crucially, Annualised Hours allows working patterns to be tailored to suit different life stages or lifestyles, meeting the needs of those demographics who require additional flexibility around when and for how long they work.


Successful implementation  

When the benefits are so clear, you might be asking why Annualised Hours is not standard practice across all employers of shift workers?

Adopting Annualised Hours is not as simple as flicking a switch. It is a change that requires detailed planning, buy-in from the top down and a commitment to maintain the system so that the interests of the organisation and its employees remain aligned.

Building employees’ understanding of the rationale behind Annualised Hours, the process behind change and the degree of involvement they will have in shaping the system is crucial.

The importance of communication and collaboration cannot be understated. Employees’ lives are built around their shift patterns and failing to give them influence over something that has a major effect on their work and home life is not going to deliver the best outcomes.

Annualised Hours contracts often become highly popular with employees, particularly when they are engaged in the implementation process and play a key role in the co-creation and ongoing management of working patterns.


Shifting sands

Annualised Hours could play a key role in helping address some fundamental issues UK plc faces around productivity and working conditions for its 3.6 million shift workers.

It’s clear we face a period of prolonged uncertainty which will require organisations to be leaner and more responsive to change.

Having a resourcing model that secures permanent, well-paid roles and supports worker wellbeing makes even more sense now than it did back in the 1970s and 1980s.


More detail on Annualised Hours can be found in Working Time Solutions’ report ‘Making annualised hours work for the UK’

Author: Editorial Team

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