Flexible Time Working

One of the buzzes in human resources at the moment is the concept of flexible work-time. While the concept is not new, the way that it is being applied is different in these recessionary times. Here we explain what it is and why employers and employees should consider it as an alternative to pay cuts and redundancies.

What does the phrase ‘flexible work-time’ mean? Put simply, it is where the employer asks both the owners/directors/managers and employees in a business to voluntarily change their terms and conditions of employment for a specified period of time.

What does it involve? New employment contracts are drawn up or, more likely, a letter of agreement is signed between both parties. These specify that terms and conditions are changed for a specified period of time, after which the ‘normal’ contract terms and conditions are returned to.

What terms and conditions are changed? Those that are modified are usually to do with hours/days worked with a pro-rata change in pay. The new terms allow the firm to ask volunteers to work additional hours when required e.g. working on a Saturday for those who normally work a five-day week; and to reduce hours worked when not needed e.g. working a four-day or three day week; using their leave in a particular week or month; or taking unpaid holidays on particular days when they are not required e.g. Good Friday. In non-busy periods e.g. during the Summer school holidays, staff can take long periods of leave (up to 12 weeks) at 25 – 50 per cent of their normal pay. Usually there are clauses about how much advance notice must be given by both parties.

How long should the period of time the flexible time contract be? That depends on the organization and the industry it is operating in. We are hearing of cases where flexible futures are specified for 6, 12, 18 or even 24 months. It does not really make any sense to go beyond a short time-scale as the main reason for adopting a flexible time contract is to reduce costs, flex costs and create short-term certainty.

What are the benefits to the employer? The main benefits to employers are cost savings, and perhaps more importantly, flex-costing. Flexible work time allows employers to optimize their use of the workforce by having ‘all hands on deck’ when they are needed, but not having a surplus of people underutilized when the business is not busy. For this reason, flexible work-time is generally more appropriate for service industries where the rate of work is not constant, but is usually predictable over the short term. A good example is St. Patrick’s Day which falls on a Tuesday. Many employees with families would also like to take the Monday off, and many employers may prefer to close their business on that day as there will be fewer customers. Another significant benefit is that the company retains top talent who might otherwise leave if pay cuts alone are made. This means it is poised to ‘get back to work’ when the upturn comes.

Are there any benefits to employees? The most obvious benefit is job security in these uncertain times. Recent research has shown that many employees would prefer to take a cut in pay or reduction in terms and conditions in preference to losing their job. The most important aspect, for most employees, is trust. It is usual, for example, to include a ‘maximum salary loss’ condition in a flexible work-time contract e.g. the maximum salary reduction is capped at 20% for each calendar year the agreement is in place. It is important to ensure that the revised contract relates to changed conditions for a specified period of time (usually no more than a year) and that it does not preclude any nationally agreed pay increases (or decreases) agreed by the social partners. In most cases the same benefits continue to be provided e.g. use of a company car, commuter ticket tax saving scheme, paid gym membership as these cost the same regardless of when they are used. In organizations where flexible schemes have already been introduced many employees have commented positively on the fact that it is allowing them to spend more time with their families or to use the time off to return to studies.

What is the People Matters verdict? The economic outlook for 2009 and 2010 is very uncertain and firms need to be as flexible as possible in order to respond. It is important to reduce costs in the short-term, but not risk losing talented staff who will be difficult to replace in the medium term. A voluntary flexible work-time contract or agreement to cover the next year or so is a pragmatic approach to adopt.