Annualised hours contracts: five key steps for HR

How should employers manage workers on annualised hours contracts?
How should employers manage workers on annualised hours contracts?

Annual or annualised hours contracts can be beneficial for both employers and employees, but HR professionals need to manage them carefully. Clio Springer provides five key steps to managing them effectively.

1. Decide if using annualised hours contracts would be beneficial to your business

Under an annualised hours contract, an employee’s hours are expressed as a total number of hours to be worked during the course of the year. The hours actually worked are likely to fluctuate from week to week and month to month.

Employers that have varying demands for their products or services over the course of the year may find an arrangement like this useful. They can coincide working hours with demand rather than have periods during which employees are under-utilised, or where they have to pay overtime or recruit temporary staff.

Annualised hours contracts can also benefit employees. They offer some flexibility with periods of non-working so that they can pursue other interests, travel or meet family commitments.

2. Make clear how many hours are rostered and how many are reserve

Annualised hours contracts are usually made up of rostered hours and reserve hours. Rostered hours are set in advance via a roster that is circulated to staff. For reserve hours, the employee may be called in to work, depending on demand and the employer’s needs. The ratio of rostered to reserve hours will depend on the agreement.

Alternatively, annualised hours contracts might be made up of all rostered hours or all reserve hours. An employer that is considering using annualised hours contracts should decide what would suit it best. If it knows in advance that it will need employees to work at a certain time, it should include this time within the rostered hours, to maximise certainty for all the parties concerned. However, if its work requirements are unpredictable, it is likely to utilise reserve hours.

Either way, employers should build flexibility into the agreement to be able to alter the ratio of rostered to reserve hours should they need to do so.

3. Make clear terms on pay, holiday and sickness benefits

As with any employment agreement, employers should set out terms relating to pay, holiday, sickness and other benefits.

Are employees to be paid in equal instalments throughout the year or for hours actually worked during the relevant pay period? When can employees on annualised hours contracts take holiday and how should they notify their employer about sickness absence?

These entitlements and requirements should be set out when an annualised hours arrangement is agreed.

4. Manage the call-in process for reserve hours

Employers will need to call employees in to work their reserve hours. They will want to ensure that all annualised hours employees work their full complement of reserve hours and will need to manage the call-in process accordingly to avoid anyone slipping through the net.

Build flexibility into the annualised hours contract so you can alter the ratio of rostered to reserve hours should you need to.”

If an annualised hours employee has not worked all of his or her reserve hours by the end of the annualised hours year, this could lead to employees who are paid in equal instalments throughout the year being overpaid. It could also cause resentment on the part of employees who have worked all the required hours.

Therefore, employers should put in place a monitoring system for ensuring that all reserve hours are called-in. They should also make clear to employees the consequences of refusing call-in requests to work reserve hours. Or, where there is some degree of flexibility to refuse requests, the consequences of persistently refusing requests.

5. Keep in touch with employees on annualised hours contracts

Employees on annualised hours contracts may have lengthy periods during which they are not required to come into work (particularly where there is a high ratio of reserve hours to rostered hours).

It is important for employers to stay in touch with annualised hours employees so that they are kept up-to-date with news and developments and continue to feel an integrated part of the workforce.

Further information on annualised hours contracts is available on XpertHR

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