What if working hours were organised on an annual cycle rather than a weekly one? New ESRC-funded research by Professors David Bell and Robert Hart explores the impact of 'annualised hours contracts' (AHCs), a new way of arranging hours of work that currently covers 3-4 percent of British employees. Their study suggests that AHCs offer a number of advantages for both companies and their staff: hourly wages tend to be higher; overtime is lower; job security is stronger; plant capacity is used more efficiently; and firms enjoy greater flexibility in scheduling work and responding to demand for their products.
Several major British companies - including BP Chemicals, Blue Circle Cement, ICI Chlor Chemicals, Grampian University Hospitals NHS Trust, Manchester Airport, United Distillers, Samsung Electronics, Tesco Stores and Zeneca - have implemented AHCs. But Bell and Hart's research is the first to investigate the use of AHCs in depth across the whole British economy. Their results, based on the UK Labour Force Survey, show that:
* AHCs presently cover about four percent of full-time female and 3.3 percent of full-time male employees in the UK.
* Employees covered by AHCs are often union members. While it may seem paradoxical that unions are required to help bring about greater working time flexibility, AHCs are complex and require extensive bargaining between employers and employees before they can be implemented. Unions provide a focus for such bargaining.
* The hourly wage under an AHC is around 13 percent higher on average than the hourly wage under an equivalent standard contract. This is the 'payoff' to employees for streamlining their working practices.
* Overtime workers average six hours of paid overtime under the standard contract. This is roughly 3.5 hours per week more than employees with AHCs. After controlling for other influences, AHCs are associated with over a 50 percent reduction in paid overtime. Thus, it seems that AHCs may provide one way of breaking the 'overtime culture' that is a feature of many UK companies.
* AHCs often occur in companies that experience relatively volatile and unpredictable movements in the demand for their products.
* Employees with AHCs experience more variation in their hours over the working year. This seems to suggest that AHCs provide flexibility of hours over and above the standard contract.
* AHCs are strongly associated with a desire to obtain more plant utilisation over the working year, particularly associated with the operation of complex shift systems. For example, companies with AHCs are more likely to operate complex Continental-type shift systems and/or more weekend and bank holiday working.
* Employees involved in AHCs have been in their jobs for a long time, regard their jobs as permanent and are not interested in seeking new employment. This is a strong argument in favour of AHCs: they may be a useful device for bringing stability to the workforce.
UK industry is dominated by traditional ways of organising working time. Typical contracts stipulate that employees should provide a fixed number of basic hours each week. In addition, they may work overtime, for which they are usually paid a premium wage. But the traditional weekly hours arrangement is not the only way to arrange working time: it could be organised around an annual cycle rather than a weekly one, as with AHCs.
Such an arrangement offers firms much greater flexibility in the way they use their workforce. And employees generally benefit by being paid higher wage rates for agreeing to join an AHC.
In a typical AHC, management and workers agree on a number of annual or 'rostered' hours. Leaving aside holidays, rostered hours may vary over the year, so that, for example, the firm is better able to meet seasonal fluctuations in demand. AHCs also include rostered shift systems: for example, Bell and Hart describe the case of a company with 1,872 rostered annual hours that comprise 156 12-hour shifts.
As well as rostered hours, workers may agree to an annual number of reserve hours. These hours are used to provide additional flexibility. For example, they can be used to meet unforeseen events such as short-run upward surges in demand or abnormal absenteeism. They can also be used to cover planned events that support production and service activities such as training courses, planning meetings and company briefings.
For further information, contact Professor David Bell on 44-178-646-7486 or email: david.bell@scotecon.net; Professor Robert Hart on 44-178-646-7471 or email: rah1@stir.ac.uk
Or Lesley Lilley or Iain Stewart at ESRC, on 44-179-341-3032/41-3119
NOTES FOR EDITORS
1. The research project 'Annualised Hours Contracts' by David Bell and Robert Hart, Department of Economics, University of Stirling, was funded by the Economic and Social Research Council (ESRC).
2. The ESRC is the UK's largest funding agency for research and postgraduate training relating to social and economic issues. It has a track record of providing high-quality, relevant research to business, the public sector and Government. The ESRC invests more than £53 million every year in social science research. At any time, its range of funding schemes may be supporting 2,000 researchers within academic institutions and research policy institutes. It also funds postgraduate training within the social sciences, thereby nurturing the researchers of tomorrow. The ESRC website address is http://www.esrc.ac.uk.
3. REGARD is the ESRC's database of research. It provides a key source of information on ESRC social science research awards and all associated publications and products. The website can be found at http://www.regard.ac.uk.