Dear Annualised Hours

Dear Annualised Hours – Happy Valentines Day

Valentine’s day marks the first of many calendar events of the year often bursting with merchandise to loosen the cash from our wallet. After Valentine’s, will be Easter, then Halloween and Christmas. Each dispensing perishable and non-perishable goods that need to be produced and delivered on time.

Whilst we take it for granted that the shops will be stocked full to brimming with our seasonal goodies, the reality is that myriad of UK companies will be working overtime just in planning the resources required to deliver the goods we demand to celebrate the occasion.

For some companies, these events are where up to 50% or more of their profits are made. Getting it wrong can even lead some into bankruptcy. For the seasonal businesses, there is no option to have a fixed level of resources no more than they would have a warehouse full of Easter eggs all year round.

Planning is essential both to meet demand and stay profitable during the quieter period of the year.

Companies have deployed various approaches to meet variable demand and cope with the “peaks and troughs”;

Some employ seasonal workers (though this is getting harder post-Brexit) or agency workers (again rules around agency workers have recently become more complex) and a few have tried Zero Hours contracts though these often don’t yield the expected results. There is also the traditional overtime approach but is much more expensive for low margin businesses.

One very successful model is Annualised Hours. This is where workers are contracted to do a fixed number of hours in a year (e.g. 1900) but the actual hours deployed in any period will vary based on business demand.

Thus, during quiet business periods staff might only work 100 hours a month and in busy periods 250 hours per month. The employee still gets paid the same each month regardless of the hours worked (up to the annual contract) but the company can align those resources to seasonal demand.

This approach has many advantages. The company can leverage its skilled, experienced and committed workforce rather than rely on the availability of agency/seasonal workers whose loyalty and skills can often be variable.

However, it does require careful planning. Annualised Hour workers are guaranteed the fixed number of hours whether they are used or not, so management need insight not just into team hours, but each individual to ensure some are not over-deployed resulting in a protracted break whilst other colleagues have a positive balance that could not be deployed before the end of the Annualised period (resulting in wasted hours).

It was these additional management overheads that historically slowed the widespread adoption of Annualised Hours, but with the introduction of cloud-based Rostering systems with Annualised Hours calculations, there is now a compelling reason to adopt this approach to address seasonal and variable business demands.

With Valentine’s day approaching, there is no better time for Seasonal businesses to get re-acquainted with Annualised Hours as a way of delivering on time, every time.

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