What are Annualised Hours?

Annualised Hours Meaning and Benefits

When looking to tackle strategic workforce challenges, organisations with mobile workers and varying demand should be asking, ‘what are annualised hours‘?

Annualised hours is a rota method of calculating employees’ working time and pay over a standard year, rather than by the week. It is an established and proven way of organising field service operations to improve productivity, flexibility, and employee well-being.

Annualised hours have been used since the mid-1970s to avoid waste, limit the use of overtime, and create more work-life balance options for mobile workers.

You can read more on the history of annualised hours here.

What are annualised hours contracts?

An annualised hours contract sets out an employee’s annual hours allowance that they must work across a year. This allowance is different to standard contracts that stipulate how many hours an individual will work on a weekly or daily basis.

Annualised hours contracts are central to adopting annualised hours. Changing an ‘hours per week’ contract to express the equivalent number of hours over a year provides much more flexibility around how and when this working time is deployed.

Instead of providing a constant ‘flat’ level of resource, an annualised hours contract ensures mobile workers’ hours can be aligned to demand and used when needed most.

What is an Annualised Salary?

An annualised salary represents the total yearly earnings of an employee, typically suited for salaried roles where the pay is consistent, irrespective of the hours worked. This salary is derived by multiplying the monthly or weekly earnings by the number of pay periods within the year. Unlike annualised hours, which vary based on work demand, the annualised salary remains fixed, offering stability in compensation.

In some cases, this salary framework might be integrated with an annualised hours system, allowing employees the flexibility to work differing hours weekly as required, yet ensuring a steady annual income.

What Does Annualised Pay Mean?

We are often asked what does annualised pay mean? Annualised pay and an annualised salary begin with an annualised hours contract. Annualised hours contracts ensure pay is equal every month, even if the employee has worked more hours one month and less in another, throughout the year. Annualised pay guarantees a predetermined yearly income, simplifying financial planning for both the employer and employee. It’s particularly beneficial in roles where work hours fluctuate due to seasonal demands or project cycles, as it ensures employees receive a constant salary despite varying workloads.

This salary model is also advantageous for employers, as it aids in budgeting and forecasting payroll expenses over the year. For employees, it offers financial security and the flexibility to manage work-life balance more effectively, knowing their income remains unchanged even as their work hours adapt to business needs.

Benefits of Annualised Hours Contracts

Annualised hours contracts offer a set of benefits for both employees and organisations with field service operations. Using annualised hours contracts effectively helps tackle important issues around productivity, job security and working conditions.

Benefits for Employees

Stable Income

Whilst total hours worked can vary week-to-week and month-to-month, annualised hours contracts pay a regular salary. This contract stabilises pay and provides more certainty, which is helpful if employees want to secure finance like a mortgage or loan.

Predictable Hours

As annualised hours contracts ensure working time is used in a more targeted way, it gives employees more visibility over when they will be required to work. Annualised hours reduce the need for short-notice working, which can impact work-life balance and make it hard for mobile workers to plan their personal lives. Annualised hours contracts also typically reduce long hours working, which can lead to fatigue and wellbeing issues.

More Choice

The increased flexibility created by annualised hours contracts enables shift pattern design which suits different demographics and work-life balance requirements. By providing more options around when to deploy contractual hours, annualised hours open up the potential to create appealing shift patterns that better suit personal commitments such as childcare.

Benefits for Employers

Accurate Resourcing

Using annualised hours contracts to match employee shift patterns with anticipated demand reduces the need for overtime and idle time while generating significant productivity benefits. Organisations with field service operations can achieve transformative financial and performance gains by introducing a well-planned and managed annualised hours system.

Less Need for An Agency

Annualised hours ensure demand can be met using the total hours of a core contracted workforce. Contingent labour becomes a ‘top up’ mechanism rather than embedded in a resourcing model using annualised hours. Mobile workers on annualised hours contracts are typically more productive and provide better service levels than agency staff.

Reduced Complexity

Introducing annualised hours contracts standardises T&Cs and working practices, creating more fairness, transparency and fewer field service management issues. Annualised hours typically free up more management time to focus on other areas of performance improvement, recruitment, and retention.

If you’d like to understand more about the benefits of annualised hours, speak to one of Totalmobile’s shift work and rostering experts.

Download your free ‘Transforming Shift Work’ eBook

How do you work out your annualised hours allowance?

Central to working out annualised hours allowance involves understanding how many productive hours employees work in a year.

A traditional working time contract might stipulate a 40-hour week and provide 25 days of paid annual leave, plus 8 days of public holidays. The organisation pays for 2,087 hours; Deducting 25 days of annual leave and 8 public holidays leaves you with 1,823 hours. However, other influences exist when working out annualised hours allowance, which may further reduce the 1,823 hours.

These can include:

Sickness and jury service
Parental and compassionate leave
Training and paid breaks

Determining your mobile workers’ net hours’ is key when calculating an annualised hours allowance. Using an annualised hours calculator can make this step much simpler. Once this is complete, annualised hours contracts provide much more flexibility around how and when to deploy worker hours throughout a year. Understanding how many hours are available and the inherent flexibility creates a truly responsive annualised hours system with shift patterns ensuring the correct number of people are available when needed.

Annualised hours contracts benefit organisations with 24/7 field service operations, allowing a workforce to be much more flexible, productive, competitive and resilient.

Do you get paid overtime on annualised hours?

It is possible for overtime pay on an annualised hours contract. However, this will depend on the contract’s terms and conditions. Alternatively, any additional hours worked will fall under the annualised hours contract and hours adjusted accordingly within the remaining months of the year.

Many organisations with field service operations incorporate a ‘Banked Hours’ system as part of annualised hours. These can use Flexi Shifts or Standby Shifts to manage demand variability without resorting to short notice overtime. Where ‘Banked Hours’ are used in an annualised hours system, employees should be given certainty over when they are working, when they are not due to work and when there is a need to be potentially flexible.

How do you manage annualised hours?

How you manage annualised hours will vary based on an individual employer and employees’ needs. Managing annualised hours effectively requires a structured approach to ensure the business and its employees benefit from this flexible working arrangement. Here’s a step-by-step guide on how to implement and manage annualised hours:

Create a Contract

A well-constructed contract is the foundation of a successful annualised hours system. This contract should detail the total hours expected over the year, the flexibility in work patterns, any peak periods requiring more work, and how overtime is handled. Ensuring clarity in these areas sets clear expectations and responsibilities for both parties, making the arrangement beneficial and sustainable.

Track Hours

Effective management of annualised hours requires precise tracking of hours worked. Rostering software can streamline this process, allowing for real-time monitoring of hours against the annual total. This helps balance workloads, identifies trends, and proactively makes necessary adjustments.

Adjust Schedules

Flexibility is a cornerstone of the annualised hours system. As such, it is crucial to adjust schedules to meet changing business needs while respecting employee work-life balance. Regularly reviewing work patterns, possibly quarterly, ensures that the distribution of hours aligns with both operational demands and employee preferences.

Communication and Record Keeping

Open communication and thorough record-keeping are pivotal for the smooth operation of annualised hours. Keeping all stakeholders informed about schedule adjustments, remaining hours, and any changes in business requirements fosters a transparent and trust-based environment. Maintaining accurate records supports compliance, resolves disputes, and aids in future planning.

Conclusion

The management of annualised hours must be effectively planned and administered to harness its full potential for your field service operations. Leveraging the expertise of shift work specialists and advanced rostering software can be a game-changer.

Totalmobile’s experts are equipped to guide you through designing, implementing, and managing an efficient annualised hours system.

Annualised Hours | Frequently Asked Questions

What are the rules for annualised hours?

Annualised hours are a flexible working arrangement in which an employee’s work hours are calculated annually rather than weekly or monthly. The rules for annualised hours contracts should specify the total annual hours, the distribution of hours, pay arrangements, and overtime rules. Employers should also establish policies for managing annualised hours, including procedures for shift planning and adapting to demand fluctuations.

How do you annualise hours?

To annualise hours, calculate the total hours an employee is expected to work yearly, deduct holiday entitlements, then divide by distribution periods. This process includes determining average weekly hours, multiplying by 52 weeks, and subtracting holidays and bank holidays to get the baseline working hours.

Does annualised hours include annual leave?

Yes, annualised hours include provisions for annual leave, calculated by deducting statutory annual leave and bank holidays from the total annual hours. This ensures employees receive their full holiday entitlement within the framework of annualised hours.