FLEXIBLE WORKING: A possible solution for small businesses who want to attract and retain workers through the ups and downs…..


Most small business owners are faced with peaks and troughs in their business – times when it’s very busy and times where it is quiet. ABC Radio National Life Matters program this morning discussed how businesses have weathered the global financial crisis (GFC) highlighted that those businesses who managed their business and their people in a flexible and innovative way came through that environment pretty well. One business decided to reduce their overall working week to four days on a permanent basis, another business asked their staff to take a pay cut of between 10% and top management 20% until the situation improved. They had a 79% take-up of the pay cut, and workers were paid back the money owing plus 25% bonus within 5 months –not hard to see why there is high trust in that organisation.

These are all good solutions that have obviously worked for these organisations. However, not everyone is in a position to take a pay cut at short notice and the four day week may work for some times in the business but not when it is very busy or if you have clients that expect “business as usual” working hours.

The other key reason for looking at this solution is that anyone with a mortgage is under pressure to keep payments going at the level of commitment with the bank. Banks require stability and permanency to approve a mortgage, and are not interested in anything that isn’t permanent – try getting a standard loan when you are working on contract or on casual rates.

So, my suggested solution is for some workers to move to what I would term a “permanent flexible” employment arrangement, where the time is carefully managed, for the same agreed salary. The concept is that pay stays constant whilst hours/ time worked might vary. For example:

Sue works in a specialist retail outlet and is employed for a 38 hour week. This business is very busy over Christmas and New Year and during the Southern winter – June to August. In total about 4 months of the year, the business needs her to work about 50 hours a week. The rest of the time is quiet and requires less time – about 30 hours per week. This system means that regardless of the hours worked or not, as long as the hours worked per annum are managed as the same, the pay will remain the same every week.

TIME WORKED
52 weeks per year
x 38 hours per week  = 1976 hours per annum as outlined below

Busy period* 50 hours x 17 weeks =  850 hours worked
Less busy period*
31-31.5 hours a week x 31 weeks =  978 hours worked
MINUS   4 weeks
recreation leave x 38 hours per week= 152 hours paid leave


* Public holidays are mixed in here and appropriate pay rates should be added in to this if they are worked. Sick leave is also included in these hours.

PAY remains the same over the 52 weeks of the year, regardless of hours worked.

Another more extreme example might include larger amounts of time not working at all, with an overall smaller number of hours worked per annum.

David is working in a seasonal business that only operates 7 months of the year. He currently works on a contract for 40 hours a week for an hourly rate of $28 per hour flat rate including penalties. David is a good, reliable worker but he is never sure if the employment will continue at the end of each season, and neither is his employer. He often works other jobs in the off period but they are also pretty uncertain.

In this situation, David works 40 x $28 per week x 30 weeks = $33,600

Certainty for everyone could increase if the employer paid David a weekly salary of $646.15 for the whole year. This would also even out tax taken every week and give David more certainty and surety to be able to apply for a standard mortgage, as he would be an employee (contract of service) rather than on contract (contract for service). It may increase loyalty and trust between David and his employer, and ensure that he returns each year to his employment. They may also wish to review the arrangement each year where there is an expectation of more or less hours. David could also claim this employment as his main job for tax purposes and still be able to work outside of this arrangement on the off-period.

Some of the benefits of this system include:

  • Certainty for the employee to allow them to plan and budget;
  • Ongoing employment that satisfies credit providers;
  • Tax paid is the same each pay and minimizes the problem of underpaying or overpaying income tax;
  • Certainty for the employer with their employees – they are more likely to keep people that they have invested time, skills and knowledge;
  • Potential flexibility for both employee and employer around hours worked depending on mutual needs. This arrangement also gives a regular opportunity/ excuse to discuss work hours, work needed to be done. It also focuses the employer more closely around work planning and what is actually required.

This arrangement may not necessarily work in all employment situations but it is certainly worth entertaining, particularly for those businesses that need flexibility and certainty with their employees.

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