Managing working time: Why employers must tackle working time

Section one of the Personnel Today Management Resources one stop guide to managing working time. Other sections.

Working time is now firmly on the business agenda as many UK companies await the results of the long and many deliberations of the European Commissioners, the Council of Ministers and the Members of the European Parliament on the Working Time Directive, which threaten to throw the UK's opt-out to the average 48-hour working week onto the scrap heap.

For many years, the UK has relied heavily on a long-hours working culture, with the use of overtime firmly embedded in the working environment. And Britons are still working longer hours than almost all European counterparts, according to recent research by independent consultancy the Work Foundation Still at Work? An empirical test of competing theories of the long-hours culture.

Competition from Eastern Europe and the Far East continues to mount steadily. At the same time evidence grows showing that working long hours can be detrimental to productivity and send both long- and short-term absenteeism rates soaring, British businesses are increasingly re-examining their approach to working time.

What research shows

Also thrown into the melting pot is the anticipation of the opt-out being scrapped along with the need to cater for an increasingly 24-hour society and employee' wishes for a better work-life balance.

More than a third of staff report that working long hours negatively affects their performance and a significant proportion believe they could be just as effective and productive if they cut their working hours. This is according to a Chartered Institute of Personnel and Development (CIPD) survey, Working time regulations: Calling time on working time?, published in May 2004.

Legislation such as the Working Time Regulations 1998 and the introduction in April 2003 of the right of parents with children under six years old to request flexible working is helping to foster a climate of change in the working time environment. Employees increasingly seek to extend their leisure time and attain the elusive work-life balance and employers are seeking ever more inventive approaches to how they organise working time.

Brazilian industrialist Ricardo Semler, author of Maverick and The Seven Day Weekend is one of the best-known examples of an employer thinking laterally in terms of working time. He has written extensively on the empowerment of management and workforce towards democracy and creativity in the workplace, reduction of working time and establishment of balance between work and leisure. He points out that the "weekend is ending" and that there are more and more circumstances where work needs to continue through this traditional leisure time.

The Work Foundation's report finds that while the actual proportion of people working more than 60 hours per week in any one European country is still small, in the UK around 896,000 men and 492,000 women regularly work more than 60 hours per week. The report highlights the prevalent culture of 'presenteeism' where people spend ever-longer hours at their place of work because they think it is expected and the fact that long hours are increasingly supported by EU employers and employees.

Paradoxically, other research points to the tide turning somewhat in terms of hours worked. The average working week has fallen by more than an hour since 1998, according to data from the Office for National Statistics analysed in Working hours in the UK, a survey by the CIPD published in December 2004.

People are less willing to work overtime, placing much more emphasis on their leisure time. Employers willing to think laterally about working time can end up with a win-win solution for both themselves and employees.

History of long hours

But there is still a widespread culture of overtime in the UK, including unpaid overtime. According to the TUC's unpaid overtime league table published in February 2005, UK employees did unpaid overtime worth £23bn in 2004. And it is not a question of employers rejoicing that they are getting labour for free as there is frequently a high price to pay in other ways such as low productivity, fatigue, low self-esteem and mistakes. About 10% of employees report damaging physical effects and 17% effects on their mental health, according to the CIPD.

The UK has a long history of long hours and overtime. A century ago, people in the UK worked an average of 50 hours a week. From just after the Second World War up until the late 1960s, most of the British working population worked the equivalent of a 42-hour or 5.5 day week, with the industrial sector often shutting down entirely for set holiday periods.

During these years, there were far fewer continuous process industries than there are now. Capital investment in machinery was less intensive and service and retail industries operated relatively strict legal opening and closing times, with licensed and restaurant premises having similar restrictions.

As shift working became more common in the industrial workplace, eight-hour and 12-hour shifts became the norm and a 42-hour contract was standard, both for good mathematical reasons given a 24-hour day and 168-hour week for 24/7 operations.

The 1960s saw pressure mounting from trade unions for reduced working hours and increased holiday entitlements. The working week was progressively cut back from 48 or 42, depending on the industry sector, to 39 or 40 hours. Widespread dependence on overtime to cover the same production requirements with fewer labour hours saw the beginnings of the UK's overtime culture.

The Thatcher era and subsequent years saw a shift in government attitudes towards unions and the beginning of huge investments in new plant, machinery and technology bringing computerised control of production. Investors sought to sweat their assets with more 24-hour operations. But for many industries, changing labour contracts was a bridge too far - although there was some early uptake of concepts such as annualised hours in the paper-manufacturing sector, glassmaking and in some chemical and pharmaceutical processing plants.

Around this time, there were also the beginnings of a sea change in the retail environment which has impacted all the way down the supply chain. Legislative change meant that retailers - new supermarket chains in particular - were able to extend hours of operation, introducing weekend trading and extended opening hours. Demand for an extended service obviously meant that working hours in the industry had to change. But it also meant that retailers were demanding that their suppliers change to accommodate new requirements such as 24-hour deliveries and seven-day operations.

The huge growth experienced in other service environments such as air services and call centres also brought with it new demand models for labour, including peaks and troughs in demand with seasonal, weekend and Christmas and Easter peaks.

New developments

In the mid-1980s, following the opening of the Nissan plant in Sunderland, Japanese production models such as Kaizen, Just in Time and Total Quality Management were introduced which meant that supplier industries had to adopt more flexible workingpractices. In some industries this has meant alignment of working time practices to the new production models to provide seamless mechanisms in both process and the supply of labour.

But despite all these changes, outdated and restrictive working time practices continue in many industries with labour flexibility provided by overtime and, in some industries, the use of agency-supplied staff for low-grade work at times of peak demand.

Since the late 1990s unions and industry seem to have become more willing and able to work in partnership, primarily in response to new threats from the so-called tiger economies of South East Asia, from India and China and most recently from Eastern Europe, with manufacturing and service industries, such as call centres and financial services, coming under threat from their more flexible and responsive competitors across the globe.

In the past 25 to 30 years, market changes have led to an increase in the number of part-time and temporary workers. The growth of customer/service orientated retail operations which aim to meet well-defined peaks and troughs in demand through flexible working, has corresponded with socio-demographic and economic changes such as increases in women, students and retired people wanting to work hours to suit. Other changes include the growth in schemes such as job-sharing, flexitime and working from home.

Change in our society and in our economy continues, bringing demands for more creative and flexible models of labour supply to cater for 24-hour society, with leisure and hospitality industries operating 24/7, revised UK licensing for pubs and clubs, 24-hour supermarkets, service stations and transport services.

Current working patterns

Working time is a function of an employment contract which typically specifies the number of hours for which an employee is contracted to work, how many annual holidays and public holidays they are entitled to and when the employee is expected to provide those hours, and what breaks should be expected.

Patterns of working time can vary from the simplest nine to five, Monday to Friday, to complex continuous shift patterns or Annual Hours schemes which may schedule varying numbers of hours at different times of the day, week or year.

The simple schemes are characterised by traditional holidays-on-request arrangements based on consent levels. If weekends are not worked, scheduling this type of activity raises no large issues of planning. But shift-working is not well understood by many managers or employees beyond the patterns that happen to be traditional in their own industries and there is surprisingly little in the way of structure or methodology to designing shift patterns. Working time is a sensitive area because it affects leisure time and people generally shy away from change. As a result there is often a reluctance for both management and staff to move away from the familiar.

Recent years have seen the development of computer methodologies for scheduling complex patterns of work which provide labour on the basis of a stated level of demand. These systems have dictated that the process of designing shift patterns be much more scientific and follow a clear method that will lead from statement of demand through to the identification of shifts and the production of rotas and calendars, together with statistical analysis. Such systems and the ability to pose complex 'what if?' questions have revolutionised shift and roster planning in many industries and led to a much better understanding of the key issues and how to resolve them. Working pattern design has become faster and more mathematical and visual, helping workers to trust the process more easily.

There has been a growing desire among employers to have more control of labour supply so that hours are available in sufficient quantity when the business requires them - increasingly at the whim of the customer.

Labour cost in Western Europe has become a primary issue in light of global competition. Companies are seeking to reduce the level of labour input through higher investment in equipment, retaining fewer, but more skilled and better-trained, employees who will work flexibly. They also want to stabilise costs so they are predictable even when there are contingencies, but this can be difficult in an overtime or agency/temporary environment.

The UK's 48-hour opt-out has been consistently defended by bodies such as the CBI, the CIPD and the EEF engineering and manufacturing body, who regard the UK's flexible workforce as essential to economic success and its ability to be competitive. But the 48-hour maximum average over a reference period of 17, 26 or 52 weeks (see Section 2 ) can provide more than enough flexibility for businesses to deal with contingencies, remembering that our European competitors consistently show higher levels of productivity and lower overall costs in their production environments. An end to the opt-out could well provide a timely end to the UK's long-hours culture and dependence on overtime while improving health and safety and work life balance.

Certainly, today's employee wants to work fewer hours, take more holidays, and have patterns of work to suit increasingly 24/7 leisure models. Work-life balance has become a byword in recent years for unions and politicians, both keen to reduce hours and increase job numbers. Trends for holiday taking are changing from traditional school holidays at summer, Christmas and Easter, to year round demand to accommodate winter sports lovers, long-distance travellers and single and child-free employees who wish to take vacations at off-peak times. The traditional model of two weeks is also changing: frequent short breaks are becoming more common with some people opting for longer breaks to accommodate more exotic and distant locations.

The annual hours model means that employees are afforded attractive periods of time off on a regular basis and can plan their leisure time more easily as they know well in advance when their time off is scheduled.

Low unemployment in the past six or seven years has affected the efficiency of the agency labour model across the country, due to costs of recruitment and training and a lack of availability of good quality people. Aspiration is towards permanent posts rather than agency positions which leave many feeling fearful of being laid off. There can often be quality issues and resentment from the core workforce towards people working on a temporary basis.

Working overtime has always been dispersed among the workforce with some employees wishing to work all available overtime hours and others none. Increased prosperity for some, job security, double income families and a greater taste for leisure time and activities now means that in some industries, fewer individuals wish to work overtime even when attractive premiums are being paid. Working at weekends, evenings and nights is becoming less palatable for the individual and continues to be expensive for the employer who wishes to attract people to work these hours.

Those who are prepared to work long hours can be self-selecting, but for some industries boom and bust trends and seasonal demand increases have given rise to a dependence on overtime hours almost regardless of the needs or preferences of the employee. These include construction, rail engineering and other maintenance services which often depend on out-of-hours activity to gain access to the site, machinery and equipment.

A long-hours culture also continues in the security sector where many people work a 60-hour week and in much of the hospitality sector such as in catering and kitchen operations where a highly 'macho' approach is frequently taken to working time. Even in the transport sector, where health and safety is so paramount, working long hours is still firmly entrenched and many long-distance drivers still work the maximum 50-hour week they are allowed. After the Clapham rail disaster in which long hours was a contributory factor, limits were placed on the number of hours which can be worked, but the maximum still stands at 72 hours in one week.

Dependence on overtime

Such cultures are characterised by mutual dependence on the practice of working long hours to achieve production levels and satisfactory levels of earnings. But it is not always the case that employees work overtime to increase their earnings. According to the TUC, on average, each employee who did unpaid overtime would have earned £4,650 for their unpaid hours if paid at their normal hourly rate. If they had done all their unpaid overtime at the beginning of the year, they would have worked for free until 25 February. The earnings data is taken from ASHE (the Annual Survey of Hours and Earnings). The calculations assume a normal working week of 40 hours and six weeks holiday a year.

But even if employers do not pay employees for overtime, there are other costs of a long-hours culture such as fatigue, stress, high sickness absence and risks to health and safety. Long hours affect productivity and the morale of the workforce, making workers less motivated and less able to achieve production targets and service levels. So long as overtime practices and long hours remain the mainstay of flexibility in UK industry then low productivity and poor service in these industries will continue.

Wiping the slate clean and opting for an annual hours model (see Section 6 ) has meant significant cost savings and increases in productivity for many employers. Better usage of assets is often enjoyed which in the case of organisations such as hospitals or factories which have made huge investments into equipment, can be a major consideration.

Obstacles to change

But before moving to shorter working weeks or to annual hours schemes, employers need to overcome resistance to change - among both management and workers. In one high technology engineering industry, there was huge resistance to the idea of staff working Friday afternoons, even when faced with the threat of closures. Employees can be fearful of change, losing pay and of being expected to work at times they regard as unsociable.

Another obstacle is the belief in boardrooms that headcount per se is an accurate key performance indicator (KPI). Headcount reductions, therefore, become the resort of boards that wish to cut costs rapidly and visibly. But if a smaller workforce is then supplemented by more expensive peripheral forms of labour which of themselves then give rise to inefficiencies and wastage, the savings are short term. Employers need to consider the overall cost of labour, not headcount in isolation.

Improved planning and well thought-out strategies for long-range control of labour cost and for optimum use of labour are required, along with management teams who can work alongside unions and the workforce to effect change giving benefit to all of the organisational stakeholders.

As the CIPD says in Working Time regulations: Calling time on working time?, employers need to be looking at more varied, creative, motivating and effective ways of increasing performance and productivity rather than simply increasing the workload and working hours of their staff.