Are employers and government missing a trick by clamouring for a UK opt-out? They argue an extension will make us more flexible and more competitive, but this contradicts a wealth of research illustrating the inefficiencies of long-hours cultures in the industrial workplace and the proven effectiveness of concepts such as annual hours.
But uptake of annualised hours has been slow in the UK.
The reasons for this are manifold. There have been cultural barriers to implementation as a result of our historic dependence on overtime as a primary means of flexing labour supply. An entrenched culture of low basic pay, supplemented by high overtime levels, has been defended for different reasons by workforce, managers and boardroom alike.
In addition, "headcount paranoia" is an unfortunate but real hangover from the 1970s and 1980s, when boardrooms saw headcount as the key performance indicator for labour. A more valid indicator, however, is total labour cost inclusive of peripheral sources such as overtime and temporary or agency workers.
There is also a perception that annual hours systems are time-consuming and expensive. As with any business-improvement initiative involving change, planning is vital in order to get it right.
It is useful to consult best-practice models. Software can assist in the demand-based scheduling of working time, giving operational control to management and leaving the HR team or consultants to provide the higher-level processes.
Cost, of course, must be set against benefit. There is clear evidence of savings and bottom-line contribution from reduced overtime. More research is needed, however, and organisations need to be able to benchmark annualised hours in terms of both profitability and workforce benefits. We are currently running a project, in conjunction with The Business School in Manchester, to explore these issues in more detail.
Service improvements occur when labour can be flexed in line with demand fluctuations. The RAC and Gleneagles Hotel are two excellent examples of organisations that operate annual-hours systems. Both experience volatile and seasonal demand; for both it is essential to have people with the right skills in place at the right time.
Improved productivity and culture change run hand-in-hand with high morale and motivation of the workforce, and a short-hours culture. Colman’s of Norwich, a best-practice site and Factory of the Year winner, implemented an annualised hours scheme. The result? Efficiency increased by a third, and empowerment and flexibility became key words in a very different organisational culture.
Few employees want to work the long hours of the past, and the advent of work-life balance policies and double-income families have had their impact. Overtime and long-hours cultures may well be institutionalised in some industries and difficult to change, but the promise of shorter hours, more attractive and family-friendly working patterns and more usable leisure time is increasingly alluring.
There is no doubt that great progress is being made. Almost a million full-time employees work under annual-hours contracts in the UK, representing 5 per cent of the total workforce and almost 10 per cent of the industrial workforce.
To gain acceptance of this type of initiative, buy-in by unions and workforce representation is crucial. Imposed systems rarely work, and unions still face real challenges in this regard. However, in general they do an effective job of demonstrating an understanding of the power of annualised hours and promoting its adoption. In the past year we have reached highly satisfactory agreements on behalf of clients with the Transport & General Workers Union, the GMB and Usdaw.
A positive pattern has now emerged in terms of how annual hours can be used as a means of building trust in the workforce. As the process is all-encompassing, it clears the way for new working cultures and acts as a catalyst for change and restructure. One organisation in food manufacturing, which advertised a greenfield annualised hours contract, was inundated with applications from people keen to have a job that offered a stable income and an attractive work-life balance.
I have no doubt that there should be an end to the opt-out. Combined with changes to current reference periods, this will help to establish a highly productive annualised culture in UK industry.
Kevin White is managing director of Working Time Solutions Ltd.