Member Article

Flexible response to market demands - annualised hours

Most sectors of business continue to experience peaks and troughs in demand in the stop-start recovery we are experiencing.

SONE Products Ltd in Stanley, County Durham, is a world-class design and manufacturing company. We introduced an annualised hours system ten years ago and I believe this approach could provide a positive solution to many businesses currently experiencing fluctuating demand.

We employ 125 people at our 3,200 m2 facility, providing a complete service for the supply of plastic packaging products, application systems and dispensing solutions for the cosmetics, cosmeceuticals, healthcare, personal care and diagnostics markets.

The annualised hours system is worked by 103 of our 125 employees, with the remainder holding ‘staff’ positions involving dayshift hours. The system was originally introduced to help the business cope with peaks and troughs in demand without immediately resorting to the recruitment of temporary/agency staff or the need to lay off employees when orders were reduced.

Banking hours

The system requires certain employees to work a specific number of hours each year. During busy periods additional hours can be worked which are ‘banked’ or ‘accrued’. When production demand is lower, employees are not required to work and the time is deducted from the banked hours.

Individuals can accrue a maximum of +150 hours through working additional time as required by the business. Equally, the process allows them to carry up to -70 hours, for example during periods of sickness or shutdown, when hours are automatically deducted from their account. The company does reclaim hours if excessive hours build up over the -70 level and these are processed through a payroll deduction.

The system also allows employees the flexibility to take time off for appointments or personal commitments utilising their accrued annualised hours.

Benefits

There are many benefits to an annualised hours system. We implemented this way of working in 2002 following their successful introduction by our then parent company in Germany. Although we are not a seasonal business, we do need to flex our production schedule sometimes to address both short-term fluctuations in customer demand as well as longer term trends, so finding a solution to this situation was the main driver initially.

However, now that it is an established operational model, not only does it allow us to utilise working time more effectively, we are also able to accurately forward plan with a set wage bill and no excessive overtime or wage costs. We are also able to retain skilled employees because we can schedule our labour requirements as well as respond at short notice to customer orders.

For employees, the annualised hours system provides increased job security, which is of prime importance these days and it means they receive regular monthly payments of equal amounts, so they can plan their finances too.

Clear communication

The main issue in setting up a system like this is around the occasional need to work extra hours at unavoidably short notice, but if you engage with your staff effectively at the outset and explain exactly how it works, it is possible to mitigate any potential negative effects.

The key issue, I believe, is to ensure effective communication, which should be the case with the introduction of any new practice. We addressed this with a presentation to employees as well as issuing a booklet which gives an overview of the system and re-clarifies the thinking behind it.

If you ensure your policy is well defined and the guidelines clearly communicated, preferably on paper to act as a reference point, this will avoid misunderstanding – and if you are flexible in your approach, the system will evolve over time.

www.sone-products.co.uk

This was posted in Bdaily's Members' News section by Trevor Siddoway .