What are annualised hours?
In sectors where yearly trends can be anticipated, the spotlight is now on annualised hours as the next evolution of flexible work arrangements.
Annualised hours blend the adaptability found in zero-hour contracts but leave out the unsettling uncertainty often associated with their lack of security. Dive into this blog to unpack the nuances and benefits of integrating annualised hours into your workplace.
What are annualised hours?
Annualised hours represent a flexible approach to structuring work schedules. Instead of adhering to a fixed number of hours each week or month, employees are allocated a total number of hours to work over the entire year. The distribution of these hours is tailored to both the operational needs of the business and, occasionally, the preferences of the employee.
In this system, employees might find themselves working more hours during peak periods and fewer hours during off-peak times. This is particularly advantageous for industries with seasonal demand variations.
Despite the varying monthly work hours, employees on an annualised hours contract receive a consistent monthly salary, ensuring both flexibility in operation and financial stability for the workforce. In essence, annualised hours offer a balanced approach to work scheduling, marrying organisational efficiency with employee considerations.
How do you calculate annualised hours?
Calculating your employees’ annualised hours is more simple than it seems.
- Determine daily hours. Begin by identifying the standard number of hours an employee works in a typical day. Example: If an employee works 8 hours in a day.
- Calculate weekly hours. Multiply the daily hours by the number of working days in a week (typically 5 for a standard work week). Example: 8 hours/day × 5 days/week = 40 hours/week.
- Estimate yearly base hours. Multiply the weekly hours by the number of weeks in a year to get a baseline of total yearly hours. Example: 40 hours/week × 52 weeks/year = 2,080 hours/year.
- Subtract annual leave. Convert annual leave days to hours and deduct them from the yearly base. In the UK, the statutory annual leave is typically 20 days. Example: 20 days × 8 hours/day = 160 hours. So, 2,080 hours – 160 hours = 1,920 hours.
- Subtract bank holidays. In the UK, there are usually 8 bank holidays in a year. Convert these to hours and subtract from the previous total. Example: 8 days × 8 hours/day = 64 hours. So, 1,920 hours – 64 hours = 1,856 hours.
- The resulting number is the total number of hours an employee is expected to work in a year.
What are the benefits of annualised hours?
The primary advantage is the adaptability it offers. Businesses can align workforce levels more closely with demand, ensuring optimal staffing during peak and off-peak times.
By matching workforce levels to demand, companies can potentially reduce overheads, including overtime costs.
Employee work life balance
When implemented thoughtfully, annualised hours can offer employees a better work-life balance, allowing them to adjust their working patterns to better suit personal commitments. Annualised hours are particularly suited to parents – who may decide to work more hours during term time and fewer hours on school holidays.
Some studies suggest that a flexible approach to scheduling can lead to reduced absenteeism as employees feel more engaged and have better overall well-being.
What are the downsides of annualised hours?
Managing varying schedules can be complex. HR professionals and managers need robust systems in place to track hours worked and ensure fairness.
UK employment law has specific stipulations around working hours, rest breaks, and overtime. When implementing annualised hours, HR professionals must ensure compliance with these regulations, including the Working Time Directive.
Not all employees might view annualised hours positively. Some might feel that the unpredictability hampers their work-life balance. Clear communication and a transparent approach to scheduling are crucial.
Which industries tend to adopt annualised hours contracts in the UK?
While any organisation can technically employ an annualised hours system if it fits their operational needs, certain industries find it especially beneficial due to the nature of their work. Other industries may also use annualised hours on a one off basis – to attract specific talent.
As mentioned earlier, industries that see seasonal demand peaks, such as tourism, agriculture, and retail, often find annualised hours beneficial. For instance, agricultural workers might work longer hours during planting or harvest seasons and fewer hours during off-peak times.
Some manufacturing sectors employ annualised hours to align production schedules with market demand. This allows them to ramp up production when demand is high and scale back during quieter periods, ensuring cost-efficiency.
Healthcare and emergency services
Certain roles in the healthcare sector, especially those that require round-the-clock patient care, can utilise annualised hours. This ensures adequate staffing during busier times, such as flu seasons or other predictable peaks in demand.
Firefighters, in certain jurisdictions, might operate on an annualised hours system. This ensures that there are always enough personnel on hand during periods of higher risk (like dry seasons prone to wildfires) while offering more flexibility during lower-risk times.
Some roles in education, particularly those involved in administrative or operational capacities, might work more hours during term times and fewer during school holidays.
What are annualised hours?
Annualised hours are a contractual arrangement where an employee’s yearly working hours are calculated in advance, but the actual hours worked can vary each week or month within the year.
Are annualised hours the same as a zero hours contract?
No, annualised hours are not the same as a zero hours contract – employees on annualised hours contracts receive the same, guaranteed, monthly wage, and enjoy the same benefits as typical full time employees.
Which industries use annualised hours?
Industries that use annualised hours tend to be seasonal – for example, manufacturing or agriculture.