The growing demand for flexible work arrangements as well as business needs makes annualized hours an increasingly popular concept. In this annualized hours explained article, find out exactly what this working structure entails, how it is organized and if it could be suitable for you.
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Annualized hours explained
Annualized hours relate to the total number of hours an employee works in a year. This is a flexible work contract where an employee is paid based on their hours over a year as opposed to over a week or month. Instead of having a standard 39-hour week, the annualized hours contract means an employee will work various hours over a week or month, ranging from no work to weeks with high hours. Such work arrangements are usually adopted for jobs that are seasonal or have several busy periods. Annualized hours offer greater flexibility to the employer over how much work the employee completes throughout the year.
In a study of American workers, 53% stated that a job that allows personal wellbeing and work-life balance is important. Source
A yearly hours work contract offer greater flexibility for both the company and the worker. But just how much flexibility is built into this work model? What type of hours can you be expected to work and how much structure is there to your work schedule? These are all need-to-know questions that every person considering such a contract should know. That’s precisely why they are covered in the remainder of this article. Let’s find out if it’s as good as it sounds to be!
How annualized hours work?
Annualized hours contracts work on the premise that the employer establishes the number of hours to be worked in the year. This is the opposite to zero hour contracts which doesn’t specify a minimum number of hours to be worked each year.
There is generally a structure to the hours that a person on an annualized hours contract works. These tend to fall into 3 types of schedules:
| Type of annualized hours schedules | Description |
| Core hours | Set hours when person works each day |
| Rostered hours | Set number of hours and days a person works with advanced notice |
| Unrostered hours | Hours or days when a person works with short notice |
Some annualized contracts may stipulate a set of core hours to be worked every day which allows for the remaining hours to be used as needed, e.g., working longer hours to meet deadlines at busy times.
Other annualized work contracts will operate on a rostered schedule which can include set hours, days on, days off. This is similar to shift work.
Unrostered hours can also be a stipulation of the annualized hours contract. This warrants an employee to work on short notice to meet the demands of the company, e.g., sick leave, unusually high tourism periods.
There can be a combination of all 3 types of schedules to accommodate work demands.
For instance, in a restaurant, staff may have a combination of rostered hours during the week and unrostered hours during the weekend to cater to events and celebrations.
Related: 4 Day Work Week V 5 Day – Full Of Surprising Facts & Results
How are annualized hours calculated?
Annualized hour contracts are calculated based on the number of hours in a working week multiplied by 52. Annual leave and public holidays are then deducted from the number.
The employer then needs to assess if he needs the person to work full-time, more or less hours.
Otherwise, the company can end up paying extra for overtime. Or if there isn’t enough work available, the company may end up paying an employee for hours they didn’t have to work.
For instance, say a company works 37 hours a week, has 10 days annual leave and 10 public holidays. In this case, they need the employee to work full-time.
37 hours x 52 weeks = 1924 hours.
1924 hours – 1110 annual leave and public holidays = 1714 hours per year
The employer may then establish a work schedule based on these hours to add structure to the year.
Related: Annualized Hours Pros And Cons – 12 Important Points To Know
How much annualized hour holidays do I get?
The number of holidays you get will be the exact same as if you were working those hours in a normal contract. However, they will generally be expressed in terms of hours holidays as opposed to the number of days leave that you have.
Annual leave is normally calculated using a formula, such as the below in the UK:
Number of days worked per week x 5.6 = Days holiday
So, if you work the same number of hours as a full-time worker would in the whole year, you will be entitled to the statutory leave and public holidays.
However, if you work less hours, e.g., part-time, your holiday entitlements will be calculated based on this lower number of hours. E.g., if a part-time employee works 50% less hours than a full-time worker, that worker would then be entitled to 50% of the holiday entitlements that a full-time worker gets.
What jobs have annualized hours?
Annualized hour contracts are found in industries where there may be slow and busy periods of work:
- Health care
- Education
- Food industries
- Agriculture
- Retail
- Administration
- Manufacturing
- Tourism
Annualized hours are also becoming more prevalent in companies that want to offer flexible working arrangements to their staff.
Tip: Annualized hours contracts should provide as much notice and scheduling as possible to enable a smoother working structure for everyone involved.
Conclusion
Annualized hours is yet another method of flexible working that can benefit both the employer and employee. This work strategy is more common in the UK and is typically associated with seasonal work and employment which has busy and quiet periods.
That said, it can also be used in traditional jobs to grant workers more freedom with their work hours.
With the right structures and engagement in place, annualized hours can work seamlessly.
The annualized hours strategy is only one of many approaches that can be employed to grant workers a greater work-life balance while enhancing productivity.
Here are some other useful articles I wrote that you should go check out:
- Does A 4 Day Work Week Save Money? Discover How to Save Now!
- Does 4 Day Work Week Save Companies Money? + Proven Results!
- 4 Day Work Week V 5 Day – Full Of Surprising Facts & Results
- Best 4 Day Work Week Alternatives – 7 Proven Strategies!
- Annualized Hours Pros And Cons – 12 Important Points To Know
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