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.
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By Jane King
