This report looks in detail at a resourcing framework that could help solve many of the challenges facing UK Plc.

Demand-Led Rostering and Annualised Hours is an established and proven way of organising shift working that, despite its clear benefits, has become somewhat maligned over the years and is yet to be adopted by many employers.  

However, faced with the urgent need to improve productivity, flexibility and employee well-being, it’s time organisations across the public and private sector re-appraised this system.

This report explores the past and future of Demand-Led Rostering and Annualised Hours, looking at the fundamentals of the system, the benefits it delivers and some of the misconceptions held by employers, employees and other stakeholders.

It also looks at the importance of effective planning and employee engagement to enable successful adoption.

Over the best part of three decades Working Time Solutions has developed Demand-Led Rostering and Annualised Hours systems that have helped clients deliver well over £100 million in combined savings, protected thousands of jobs and ensured high services levels are maintained.    

We are convinced that this approach holds the key to addressing some fundamental issues around productivity and working conditions for the UK’s 4.8 million shift workers.

There are numerous variations of Demand-Led Rostering and Annualised Hours systems but put simply it is a means of calculating employees’ working time and pay over the course of a standard year, rather than by the week. 

Demand-Led Rostering and Annualised Hours can be complicated to understand and administer and consequently the success of such arrangements lies in effective planning and management of the system. 

We hope this report provides some clarity on the topic and encourages more organisations to consider this alternative resourcing model.

If you would like a PDF copy of the report please contact us. 

Contents:

1. Brexit, the productivity puzzle and precarious employment

2. The fundamentals of Demand-Led Rostering and Annualised Hours

3. A misunderstood approach

4. Planning to succeed

5. Bringing employees with you

 

1. Brexit, the productivity puzzle and precarious employment

Employers face a perfect storm of strategic workforce challenges created by economic volatility, globalisation, changing demographics, rising costs, legislation and increasing scrutiny.

Having stabilised after the financial crisis and subsequent recession, many organisations are looking at how to manage through rises to the National Living Wage, Brexit and the impact of legislation such as ‘The Good Work Plan’. All of this whilst supporting job security and the well-being of their workers.

The fluid situation created by leaving the EU will require employers to increase their productivity and flexibility if they are to thrive, or even survive, in an uncertain post-Brexit world.  

You can read more about the workforce planning and management challenges it poses in our white paper.

Ultimately, with the average worker in France and Germany producing more in four days than the average UK worker does in five, the UK needs to address its productivity gap if it is to make a success of Brexit.

In addition to economic and political upheaval, societal and technological change is drastically altering the shape and nature of demand. 

We’ve seen exponential growth in the use of zero hours contracts and agency workers with many organisations’ operational models becoming reliant on them.

In a Guardian article Neil Carberry, Director for People and Skills at the Confederation of British Industry said: “One of the attractions of flexible contract options for businesses is being able to meet more volatile demand patterns in increasingly 24/7 markets”.

However, referred to as ‘Precarious Employment’ by the media, this approach to resourcing regularly creates reputational issues for employers and is increasingly under scrutiny.

The Taylor Review of Modern Working Practices (The Good Work Plan) has begun to influence Government policy in this area with a slew of new legislation including giving workers the right to request a more stable contract.

Under ‘The Good Work Plan’ all employees and workers with varying hours and shift patterns (including agency and zero hours workers) will be able to formally request a more fixed working pattern after 26 weeks of work for the same employer.

Over the past few years, we’ve also seen significant rulings on both holiday pay/overtime and travel to work time.

The potential for further changes to working time legislation (related to Brexit or precarious employment) is a further consideration for organisations trying to find solutions which will be fit for purpose now and in an uncertain future.

Employers need to take a long hard look at their resourcing models and ask whether they are fit for purpose and whether it can respond quickly and effectively to change. 

As John F. Kennedy said:

“There is nothing more certain and unchanging than uncertainty and change.”

2. The fundamentals of Demand-Led Rostering and Annualised Hours

History:

You can trace Demand-Led Rostering and Annualised Hours’ roots back to experimental labour models which were pioneered in the Scandinavian paper industry during the mid-1970s. 

Their principal aim was to limit the use of overtime and to increase leisure opportunities for the workforce. The success with which it achieved this saw the new approach adopted across many industries and territories.

Demand-Led Rostering and Annualised Hours first found its way to the UK in the early 1980s in response to increased holidays and reductions in basic working hours agreed within largely continuous process-based industries. It gained notoriety in the early 1990s as businesses used it to respond to challenging market conditions by reorganising and reducing working time.

The move from a mutually beneficial labour model to blunt cost cutting tool has done little to help its widespread adoption over the past two decades. 

However, when planned, designed and implemented properly, Demand-Led Rostering and Annualised Hours remains one of the most efficient and effective means of ensuring an organisation and its employees’ interests remain aligned. 

The need:

Shift patterns are often tied to legacy working practices or institutionalised habits. 

These can bear little resemblance to the fluid situations an organisation faces, ultimately creating harmful misalignment between demand and the supply of labour.

Inflexible shift patterns are often at the heart of resourcing issues, with models meeting neither the demand the organisation is experiencing or the needs of the employees.

• Over-supply creates inefficiencies which can lead to job losses and skills drain.
• Under-supply generates reliance on expensive peripheral temporary forms of labour such as overtime and agency staff. Typically, overtime is non-contractual and therefore reliant on goodwill. 
• In many instances, imbalance of supply and demand leads to employee stress or sickness and breaches of working time or health and safety legislation.

Furthermore, traditional forms of working can actively encourage low productivity, high waste and poor service by financially rewarding the working of additional hours. Rather than viewing overtime as a temporary measure to overcome exceptional circumstances, many managers and employees see it as a regular day-to-day element of their working lives. 

 

Looking at how overtime is worked within an organisation, it is often the case that 80% of overtime hours are worked by 20% of the workforce.

At a manufacturing site owned by Unilever, prior to the introduction of Demand-Led Rostering and Annualised Hours, there were times when employees used to ‘know’ on a Tuesday that they would be required to work overtime on a Saturday; it was planned! 

Demand-Led Rostering and Annualised Hours is a proven and effective solution to this problem.

Adopting this approach enables truly responsive resourcing models to be created using shift patterns that ensure exactly the right amount of resource is available at exactly the time it is needed.

Ten signs you should consider Annualised Hours:

1. Labour demand or supply fluctuates seasonally, weekly, daily or hourly

2. Your labour costs are unpredictable

3. Overtime is necessary to meet demand levels

4. Agency staff are used to provide flexibility or cover 

5. You risk breaching Working Time regulations at busy times

6. Your machinery/equipment frequently lies idle 

7. Your shift patterns have not been changed for years 

8. You struggle to attract candidates for full-time positions

9. Morale is low and your absence levels are high 

10. Administering holidays and shift swaps is a burden

The basics of Annualised Hours:

Put simply, Demand-Led Rostering and Annualised hours is a means of calculating employees’ working time and pay over the course of a standard year, rather than by the week.

Expressing an ‘hours per week’ contract in terms of the equivalent number of hours over a year provides much more flexibility.

It is the key to ensuring the supply of labour can be aligned to the anticipated demand over any given period.

For employees, a yearly salary is paid on a regular basis but hours worked can vary, as they are dictated by demand.

The system is designed so that shift workers are rostered only when they are needed, thereby eliminating idle time.

Demand-Led Rostering and Annualised Hours systems are based on five fundamental elements:

1. Forecast: Business analysis provides a baseline by quantifying the ‘target’ number of hours needed for the year to meet demand.

2. Profile: Total hours are assigned to reflect flat or fluctuating demand profiles which occur over the year (this can be targeted right down to in-day variations).

3. Supply: The ‘target’ number of hours can be divided by the optimal annual contract size to arrive at the theoretical number of employees and team structures that will be required to meet the forecasted demand.

4. Design: Using the forecast, profile and supply calculations, a set of operating principals can be designed which can be applied to a range of Working Time areas such as shift patterns, contracts, reserve hour rules and holiday procedures. These will be tailored to the specific needs of the organisation, its predicted demand profile, legislative requirements and workforce demographics.

5. Engagement: Employees should be meaningfully involved in the planning, design, implementation and ongoing management of the system. They are the ones who will be working the patterns and will be crucial to its success.

As we’ll explore in the next part of this report, regular reviews of these fundamental elements are essential to ensure Demand-Led Rostering and Annualised Hours systems remain aligned to the needs of the whole organisation. 

Only then can continuous improvement be achieved and organisations avoid the pitfalls associated with poorly implemented and maintained systems. 

As we’ll explore in the next part of this report, regular reviews of these fundamental elements are essential to ensure Demand-Led Rostering and Annualised Hours systems remain aligned to the needs of the whole organisation. 

The benefits: 

• Improve productivity and efficiency: Organisations with variable demand can gain visibility over resourcing requirements and plan shifts more accurately around their true demand profile. This reduces overworking (via overtime) or overstaffing and ensures the organisation can be competitive and grow…often generating more full-time roles.  

• Support full-time employees: Many organisations rely on agency workers or zero hours contracts to achieve the flexibility needed to meet their demand profile. This can create a range of issues around productivity, administration, service levels, health and safety risks and reputational damage. Annualised Hours systems ensure demand is met using the core workforce…supporting full-time employees’ job security, providing guaranteed earnings, improving predictability and strengthening employee-employer relationships.   

• Promoting work-life balance: A well-administered system will give employees more predictable working hours and patterns which are suited to different life-stages and lifestyles. They can provide certainty about which days employees may need to be flexible; adequate notice around working requirements, an equitable distribution of shift pattern types and provide arrangements to support different demographics. In many cases, Annualised Hours contracts result in higher base earnings for employees to reflect the additional flex requirements.

• Significantly reduce administration and complexity: Introducing Annualised Hours can remove legacy working arrangements that have become overwrought and out of step with operations and the workforce. Administrative resource requirements are often reduced dramatically through eliminating the need to manage overtime, agency labour and holidays and by standardising contract types, payroll and shift pattern anomalies. Simplifying Working Time also increases fairness and transparency which can contribute to enhanced employee relations, better morale and increased productivity.

3. A misunderstood approach

So, if Annualised Hours has so many benefits, then why is it not held in the highest regard and seen as the standard practice across employers of shift workers?

Part of the issue goes back to the 1990s. With a recession biting and the continuing shift towards a service-led economy, many implementations of Annualised Hours systems were accompanied by drastic headcount reductions.

Naturally this has gone some way to tarnishing its reputation with employees and unions, which in turn has made senior management cautious around adoption.

There have also been instances where poorly planned and managed Annualised Hours systems have degraded and ultimately failed. 

The most common cause of problems include:

• Adoption of off-the-shelf solutions 

• Failure to ensure shift patterns remain aligned to demand

• Inadequate systems used to manage variations; leading to errors and eroding confidence

• Employees not being engaged with the design process; leading to mistrust 

• Imbalance in utilisation of reserve hours leading to resentment amongst employees 

• Failure to effectively manage the call-in process for reserve hours 

• Failure to review, continually improve and embed within the organisation

A lack of understanding has also served to hinder the widespread adoption of Annualised Hours.