Companies that set staff hours on an annual rather than a weekly basis benefit from lower overtime rates, more efficient use of plant capacity and greater flexibility in responding to demand for their products, a study finds.
Research by the Economic and Social Research Council also claims that employees on annualised contracts benefit from higher hourly wages and increased job security.
Conducted by by professors David Bell and Robert Hart, the study shows that despite the potential advantages only 4 per cent of full-time female and 3.3 per cent of full-time male staff in the UK are employed on annualised hours contracts (AHC).
In a typical AHC, management and workers agree on a total number of annual hours, enabling employers to vary hours from week to week to meet fluctuations in demand.
Bell said the hourly AHC wage is around 13 per cent higher on average than the hourly rate under an equivalent standard contract. This is the pay-off to employees for streamlining their working practices.
The study claims that employees with AHCs typically benefit from more flexible working hours than staff on standard contracts. Bell expressed surprise that more employers, particularly manufacturers, have not adopted annualised hours as a means of responding to varying demand for products without high overtime costs.
"There are significant advantages for large firms with the resources to accommodate the costs associated with changing to AHC," he said.
However, the study also finds that AHCs are complex and require extensive bargaining between employers and staff before they can be implemented.
Several major British companies - including BP Chemicals, Blue Circle Cement, Manchester Airport, United Distillers, Samsung Electronics, and Tesco - have implemented AHCs.
By Jane King