UK government plans to revamp holiday pay calculation for part-year workers
Out-Law News | 19 Jul 2022 | 3:09 pm | 7 min. read
Employers that embrace the concept of a four-day working week could position themselves to attract and retain the best talent but thought needs to be given to the legal risks that change might present and the way in which employees can deliver objectives, experts have said.
Edinburgh-based Emma Johnston and Dubai-based Ruth Stephen of Pinsent Masons, and Isabelle Quintyn of Kwint, a law firm that operates in Belgium, highlighted the growing global interest in the ‘four-day’ week at an event hosted by Pinsent Masons on Wednesday.
For many employees, how best to balance working time with career aspirations, financial commitments and home life has been a question that has been considered for years. Equally, employers have been increasingly evaluating whether traditional working patterns are attractive to the next generation of talent and elicit the greatest productivity from employees.
Debate on these issues has intensified as a result of the Covid-19 pandemic, which changed the way many employers and employees think about work and put an enhanced focus on hybrid working and wellbeing initiatives. The result is that employers and governments have been considering whether and how to enable increased levels of flexibility in the employment context.
In Finland, for example, a move to a four day week or six hour days was mooted pre-pandemic, and the concept of a four-day week is currently being piloted in the UK, Ireland, the US and Canada, Australia and New Zealand, and Israel.
Emma Johnston said: “The UK pilot is based on ‘The 4 Day Week’ book by Andrew Barnes and his 100:80:100 principle: 100% of the pay, for 80% of the time, with the commitment from the employee to deliver 100% of the output. Participating employers range from a Norfolk hospitality business to a London asset management company and a telecoms company. The pilot started running last month and runs until December.”
“Many employers have bought in to the benefits of authentic wellbeing initiatives but they will want to see how it impacts their bottom line. Autonomy, the think tank behind the UK pilot, ran studies of productivity in 2020. Their report published in December 2020, suggests that ‘a reduction in hours would be entirely offset by increases in productivity and price increases’ in a best-case scenario. Autonomy has said that a four-day week would be affordable for most UK firms, but there is an open question as to whether ‘affordable’ is sufficiently profitable for an employers’ liking. A four-day week is unlikely to have a wide take-up in the UK if the concept does not prove itself from both an economic and wellbeing perspective.”
In Belgium, a new law has been proposed to support employers that wish to enable a four-day working week. Isabelle Quintyn said it is one of many measures the Belgian government is planning to modernise the country’s labour market, achieve a higher employment rate and to reduce the amount of stress and burnouts within the workforce.
Quintyn said: “Generally, Belgian law imposes a 38-hour maximum working week and eight-hour maximum working day. The plans for a four-day week would allow employees to condense their working week into four days of nine and a half or 10 hours each. As things stand, Belgian law does not allow for any company to implement a full time four-day workweek.”
According to Quintyn, the four-day week proposals are subject to change in the Belgian parliament. She said both employers and trade unions have identified areas where the draft law could be improved. Quintyn said that, under the current proposals, there are legal risks that employers in Belgium may need to navigate if giving effect to four-day week requests from employees.
Quintyn said: “For example, an element that remains unclear is whether an employee who asks for a four-day working week is entitled to protection against dismissal based on their request to work four days a week. Neither the duration of this protection nor the sanctions in the case of a breach are clear at this point.”
“It has also yet to be determined whether an employer risks any sanctions in a case where no reason is given for the denial of a request,” she said.
The planned reforms are expected to come into effect this autumn.
Quintyn said: “It is clear both employers and employees are happy with the possibility of a four-day working week, but both sides also have different concerns on the subject. This might reduce the likelihood of a widespread introduction of the four-day working week in Belgium.”
In the UAE, major changes to the working week took effect in the public sector earlier this year.
Stephen said: “With effect from 1 January this year, in a bid to promote the UAE as a leading business hub globally, the public sector changed its working week away from Sunday-to-Thursday to Monday-to-Friday. While this change was not mandated under the UAE’s Labour Law, the vast majority of private sector businesses have also since moved to a Monday-to-Friday working week.”
“The changes in the public sector working week also included a shift to a four-and-a-half day working week, with a half day only on Fridays to support Muslim employees who wish to attend afternoon prayers. The previous five-day working hours were not compressed into four-and-a-half days, and so this change represents a genuine reduction in working time and without any reduction in pay,” she said.
“Businesses remain free to require that all employees work full days on Fridays. However, there has been an increase in the number of employees in the private sector calling for more flexibility, a better work-life balance, and more choice in deciding when, where and how to best do their jobs. Businesses are therefore under increasing pressure, as they bid to retain top talent, to accommodate flexible working requests – whether from employees seeking to attend Friday prayer or those who wish to balance their work and family life better, among other reasons,” Stephen said.
A new labour law took effect in the UAE in February this year, supplemented by subsequent regulations. Stephen said, though, that while there is nothing in the new law to stop an employee making a flexible working hours request, the law does not provide a statutory right to make such a request nor deal with the issue of condensed working days. This means employers could be liable for overtime payments to employees if they grant flexible working requests that result in employees working for more than eight hours in a day, she said.
Stephen said: “Up and until the recent overhaul of the UAE Labour Law, the law assumed that all employees worked full time – i.e. eight hours per day, five days per week. However, the new law provides scope for employers and employees to agree flexible working arrangements in the employment contract.
“The wording in the Labour Law dealing with flexible working patterns focuses on the employer’s workload and business- and sector-based needs. What we have seen, however, is that employers are listening to their employees and, where possible, making their flexible working requests a reality. It is arguable that the ‘race for talent’ is even more prevalent in the UAE and that employers are therefore finding that they are forced to facilitate such requests to secure the best talent,” she said.
Emma Johnston said that for any employer considering how to enable a four-day working week, one of the challenges will be to think about productivity differently – whether productivity is about time spent at work, or are there better ways to measure output.
Johnston said: “Output is easier to measure if the employee is involved in manufacturing, for example, producing a set number of items per day or hour. It is less easily measured in, say, an office environment, where the end goal is business results – say a growth in profits year-on year.”
“If, as an employer, you are committing to a reduction in time worked, you will have to think differently about how employees achieve their deliverables – and that will need to be reflected in employees’ KPIs too. There does not necessarily need to be a drop in what the individual is expected to deliver, but there is likely to need to be changes to account for how the outputs are delivered,” she said.
“For example, thought might need to be given to whether a full-time worker uses their time effectively and whether, for instance, there are ways of reducing the number of meetings people need to attend to enable their work to be done more productively. Some businesses that have taken part in previous pilots say they have benefited from employees being more focused when at work. These are questions employers and employees will have to ask themselves if committing to a 100:80:100 model,” Johnston said.
Other issues also need to be considered, according to Johnston, such as how things like holidays and sick leave are managed and calculated, and how change can be achieved.
Johnston said UK employers should prepare for a change in the law in relation to flexible working.
She said: “Employees in the UK can currently make a request for flexible working, which can include a request for a compressed working hours arrangement. However, the right to request is subject to a service requirement of 26 weeks, and there are a number of business reasons which can be cited by an employer to reject a request fairly easily.”
“However, the current right to request flexible working in the UK is due to be extended. It is to become the ‘default’ position by making it a ‘day one’ right and allowing more than one request to be made in 12 months. The reasons for refusal are also expected to be limited. Reform in this area is not on the parliamentary agenda currently and the current political uncertainty means it is unclear what the likely timescales are for change,” Johnston said.
The race for talent is, however, spurring many employers to go beyond what the law requires on flexible working already, Johnston said.
“Where flexible working used to be seen ‘an extra’ or a ‘value-add’, now it is a ‘must have’,” Johnston said. “That view is supported by the CIPD's recent update on flexible and hybrid working practices – over half of organisations (56%) believe that it is important to provide flexible working as an option when advertising jobs. They see this as a vital way of attracting staff and addressing skill or labour shortages, and that employees with a flexible working arrangement are generally more satisfied at work. McKinsey also reported recently that the ability to work flexibly, in terms of place of work and times of work, is a top three differentiator for candidates.”
“A shift to a four-day week may be a step too far for some, but this is an area which has changed very quickly over recent years,” she said.
30 Jun 2022
16 Jun 2022
UK government plans to revamp holiday pay calculation for part-year workers