The retail and hospitality industries face unique challenges when it comes to labour management. Retail customer demand fluctuates wildly throughout the year. Holiday seasons, sales events and even weekly peaks create major rostering headaches for retail managers. Hiring temporary seasonal workers is the usual band-aid, but this strategy lacks efficiency and consistency.
Unfortunately, labour requirements are not as easily adjustable, leading to understaffing or excessive costs for businesses.
This familiar retail challenge may have a compelling solution as annualised flexible working begins to trend. This flexible work arrangement allows employees to make a commit to working a total target number of hours over the course of a year with the option to work variable hours each week based on the business needs. Whilst there is currently no legislation on this work style, the growing popularity of annualised hours should cause retail businesses to take note. We’ll delve into how flexible work arrangements, particularly an annualised hours scheme, can revolutionise customer service and reduce operational costs in retail and hospitality settings.
This blog discusses the concept of having a proportion of the workforce working on a flexible reference period, or commonly known as an annualised hours scheme
What are Annualised Hours?
The premise of this type or flexible working scheme is that employees have an annual number of contract hours to be worked but work a variable number of hours each week to meet the varying demand, working fewer hours during quiet periods of the year and having sufficient hours in reserve to meet the needs of the business during the peak trading periods. The hours worked each week will be rostered within both the bounds of the scheme (employee contract, min and max hours per day and week) and individual employees’ availability.
The Problem of Inflexible Contracts
Traditional contracts often cap the number of hours an employee can work per week, making it difficult to adjust staffing levels in response to varying customer demand. This lack of flexibility is further exacerbated by the following:
- Poor Forecasting Tools: Many businesses lack sophisticated forecasting and rostering tools that can accurately predict demand variations.
- Lack of Digital Records: There is often no digital record of the levels of working-hour flexibility offered by employees, which modern rostering solutions could utilise.
- Costly Temporary Recruitment: The problems culminate during peak seasons like Christmas, when businesses embark on a costly and lengthy process of temporary recruitment as early as August or September. This lack of a flexible workforce leads to misestimations about staffing needs, resulting in either understaffing or excessive costs.
Current systems that lack robust forecasting and rostering tools cannot accurately mirror weekly changes in demand. Thus, they cannot optimally roster employees to capitalise on their somewhat inflexible availability. With better systems, the limited flexibility that employees can offer could be leveraged to meet sudden shifts in demand more efficiently.
What Do Retail Industry Annualised Hours Use Cases Look Like?
The impact of a lack of data for labour trends occurs during the ramp up to the Christmas trading period, where retailers start the process of temporary recruitment in August/September Seasonal recruitment can prove a lengthy, costly, and challenging process for retailers and hospitality managers. Without digital records to accurately predict staffing needs, it is difficult to determine the number of additional staff required and the timing of when they’ll prove most helpful.
With annualised hours contracts, retail employees commit to working a total target number of hours over the course of a year but can work variable weekly rosters. Hours ramp up to meet higher demand during peak retail seasons like the holidays or busy sales promotional periods, and scale back during slower periods to prevent employee burnout. The ability to flex the available workforce up and down to optimally meet that demand is constrained when the employees are tied to contracts that restrict the number of hours they can or are required to work each week.
Workers shift from hourly to salaried pay status under the annualised hours model, providing a consistent earnings stream even as weekly hours vary. For retail employers, costs stabilise when peak season labour is covered by existing employees rather than expensive overtime premiums and last-minute temporary hires.
Benefits to Employees
- Moving staff from hourly-paid to salary offers them consistent pay each month.
- Employees can manage their own availability leading to improved work/life balance.
- Employees offering higher levels of flexibility can be rewarded.
- Overall, reduces the likelihood to of burnout and fatigue during peak periods.
Benefits to Employers
- Reduces premium overtime costs.
- Potentially eliminates temporary recruitment costs.
- Promotes skilled (non-temporary) workforce who are prepared for peak periods.
- Attracts talent due to the appeal of flexible hours.
- Flexible hours foster greater employee retention.
- Managers can mix and match flexible and non-flexible staff to meet employee rostering needs.
- Predictable labour rostering improves cost control.
- Committed staff see improved productivity, efficiency and customer service.
This win-win flexible arrangement allows retail employees to exert more control over their rosters from week to week and quarter to quarter, preventing fatigue and frustration during extremely busy crunch times. Meanwhile, retailers can strategically leverage their skilled permanent staff when service quality matters most during peak customer demand. Customers benefit from interacting with happy workers invested in the business long-term, rather than stressed and disjointed temporary help.
How Does WorkForce Software help?
The WorkForce Software Suite offers sophisticated rostering technology, which is key to enabling successful annualised hours programs in retail. Advanced forecasting tools can help predict labour needs weeks or months in advance, allowing employees to profile their weekly hours can be profiled in advance so that employees have a good indication of how many hours they are likely to be rostered across the year. Likewise, retail managers can thoughtfully plan and balance employee hours over the long run. Roster optimiser ensures labour demand is met at the lowest cost each week whilst staying true to annualised hours contracts. And self-service options let employees easily indicate their own availability preferences within the parameters of their flexible rosters.
Communication, transparency and change management are essential to getting employees on board with an annualised hours approach. Workers need to understand the model and feel in control. Start small with a pilot group and get feedback. Make sure managers are trained to leverage flexibility whilst upholding work-life balance. Emphasise that productivity and great customer service remain priorities regardless of weekly hours worked.
In addition to smoothing out labour expenses, annualised hour programs can boost retention in the retail industry. Desirable flexible rosters attract talent interested in balancing personal and professional needs whilst avoiding excessive overtime fatigue. Birkman’s recent survey indicated Gen Z and millennial employees especially value flexibility and work-life balance when evaluating job opportunities. Providing flexible annualised hours options empowers employees to accommodate other priorities or pursuits outside of work.
What are the challenges/penalties of doing nothing?
Failing to implement annualised hours schemes comes with significant risks. Unforeseen labour costs from failing to accurately budget for peak season staffing needs can leave businesses understaffed. This results in a drop in the quality of customer service and standards in retail/hospitality establishments during the most critical high-demand periods. Furthermore, excessive unplanned overtime needed to cover understaffing during peak times leads to increased employee frustration and turnover. The penalties of maintaining inflexible, status quo staffing models make a compelling case for evaluating annualised hours as a clever workforce strategy.
With the right flexible work model and optimised rostering technology, retailers can conquer the peaks and valleys inherent in customer demand cycles. Existing employees stay more engaged across the full year, rather than tuning out during slower periods. Customers enjoy service from happy workers with institutional knowledge, not stopgap seasonal hires. When leveraged strategically, flexibility is the future of retail.
The WorkForce Suite delivers Universal Compliance, allowing you to meet current or emerging labour laws and agreements with confidence.
