Annualised hours in Europe

  • Observatory: EurWORK
  • Topic:
  • Date of Publication: 22 October 2003



About
Author:
Giannis Kouzis, Lefteris Kretsos
Institution:

'Annualisation' or 'annualised hours' schemes allow employees' working time (and pay) to be calculated and scheduled over a period of a year (or some other period longer than a week, if a broad definition is used). They are a means of achieving working time flexibility which has proved increasingly popular in a number of European countries in recent years, and which has been promoted by EU policy and recommendations. Examining the EU Member States and Norway, this comparative study looks at: the regulatory framework for annualised hours set by both legislation and collective agreements; the coverage and extent of such schemes; the impact of annualised hours in practice; the views and strategies of the social partners; and future prospects.

'Annualised hours' or 'annualisation' are terms used to describe schemes whereby employees' working time (and pay) is calculated and scheduled over a period longer than the week which is traditional in most countries. Strictly speaking, the terms imply that this longer period should be one year, but here we include all systems in which the reference period for working time is longer than one week - the reasons for this broad definition are given below (under 'Regulation'). Agreements and contracts providing for annualisation/annualised hours (AH) are a relatively recent innovation in the organisation and scheduling of working time, and it has been suggested that they first appeared on an experimental basis in Nordic countries during mid-1970s (see 'All year round: The growth of annual hours in Britain', Gregor Gall, Personnel Review, Vol. 25 No. 3, 1996) before re-emerging with greater intensity during the 1980s and especially the early 1990s as a means of reorganising and reducing working time.

AH may be implemented in many ways and its introduction is usually associated with the existence of a consensus between the relevant social partners to amend the established norms for regulating working time. The individual enterprise (or establishment/site) is the most common level for implementing such schemes, and this is generally more likely to occur through agreements at this level than through unilateral managerial prerogative (as we will see below). Irrespective of the way in which AH is implemented and the level at which this occurs, it is always seen as a potential means of achieving greater flexibility in the way both labour and equipment/plant is managed. Debate on AH can thus not be detached from a broader debate on labour market flexibility and the reshaping of work. Overall, AH can be characterised as a negotiated and decentralised type of labour and organisational flexibility.

The basic AH approach of calculating working hours over a relatively long period, maintaining average hours over this reference period while allowing weekly variations, is implicitly promoted by the 1993 EU Directive (93/104/EC) on certain aspects of the organisation of working time, which provides that the average working time for each seven-day period, including overtime, must not exceed 48 hours, over a reference period of up to four months, which may be extended by Member States up to six months for particular sectors and activities or for health and safety reasons, and by collective agreement up to 12 months for objective or technical reasons or reasons concerning the organisation of work. Furthermore, the EU's annual Employment Guidelines have in recent years promoted working time flexibility, including annualisation. For example, the 2002 Guidelines invited the social partners to negotiate and implement at all appropriate levels agreements to 'modernise the organisation of work, including flexible working arrangements, with the aim of making undertakings productive, competitive and adaptable to industrial change, achieving the required balance between flexibility and security, and increasing the quality of jobs'. The listed matters that such agreements might cover include 'working time issues such as the expression of working time as an annual figure' (the 2003 Guidelines are less specific on this point). Another EU initiative of relevance is the European Commission's 1997 Green Paper on Partnership for a new organisation of work (EU9707134F) and subsequent 1998 Communication on Modernising the organisation of work - a positive approach to change (EU9901146F). The latter calls on the social partners to take a leading role, at European, national and company level, to foster a new approach to work organisation, including 'the development of working time packages in a comprehensive framework'.

The aim of this comparative study - based on the contributions of the European Industrial Relations Observatory (EIRO) national centres in the EU Member States and Norway - is to examine the main features of annualised hours schemes, looking at:

  • the regulatory framework set by both legislation and collective agreements;
  • the coverage and extent of AH schemes;
  • the impact of AH on overtime, pay, employment, working and living conditions, and company performance and competitiveness;
  • the views and strategies of the social partners in this area; and
  • future prospects.

Regulation

None of the countries examined have specific legislation providing in explicit terms for the annualisation of working time, or providing a definition of such annualisation. However, almost all have a legislative framework for working time that allows limits - usually daily and/or weekly - on normal working time (set by law or collective agreement) to be exceeded (usually within further upper daily and/or weekly limits) as long as the normal limits are maintained on average over a certain reference period. The maximum length of this reference period in many countries is one year (ie annualisation proper), but in some countries it is shorter. However, the essential principle is the same, in that the employee's working time is set on the basis of the number of hours to be worked in total over the reference period (a year or less), rather than on the basis of working a specified number of hours per week, as in more traditional working time systems. Within this legislative framework, the details of specific AH schemes are usually set at company level (often through collective agreements). Under such schemes, remuneration is generally no longer calculated on the basis of the hours worked per week but is a fixed sum that corresponds to remuneration for a standard working week or for a fixed amount of hours over the reference period. AH schemes are often connected or identical with various other methods of planning working time in a less traditional way, such as the 'bandwidth' model, working time accounts or time banks.

This study considers as AH, and examines, all systems whereby employees' working time (and pay) is calculated and scheduled over a period longer than one week - sometimes a year, but sometimes a shorter period (eg three or six months). This broad definition offers greater scope for examining such working time variation schemes and their impact in a number of important industrial relations areas. Focusing only on annualisation 'proper' would bring a danger of decoupling the issue from broader changes in the organisation of working time.

Legislative framework

Table 1 below sets out some of the key features of the legislative framework for AH-type schemes in the 16 countries examined, indicating: the main legislation concerned; the reference period over which working hours are averaged and calculated; the maximum daily and weekly hours which must be respected; the average weekly hours which must be respected over the reference period (or in some cases the annual limit on hours); any applicable conditions, including requirements for a collective or similar agreement in order to apply the scheme; and any exceptions allowed from the basic rules.

Table 1. Legislative framework for annualisation/working time variation schemes
Country Main legislation Reference period Maximum daily hours Maximum weekly hours Average weekly hours (or annual maximum) Conditions and exceptions
Austria Working Time Act (Arbeits- zeitgesetz, AZG) 1997 (plus decrees in the case of public services, based on specific service regulations for the various groups of public servants). Up to 12 months - 48 40 (or collectively agreed week, if shorter) Collective agreement required for introduction of AH (or works agreement if there is an 'opening clause' in relevant collective agreement).
Belgium Laws of 16 March 1971 (as amended), 10 August 2001 and 17 March 1987 and national collective agreements No. 42 of the 2 June 1987 and No. 42bis of 10 November 1987. Between 3 and 12 months 9 under flexible working week schemes; 11 or 12 for specific reasons 45 under flexible working week schemes; 50 or 56 for specific reasons 38 Flexible working week schemes: normally require sectoral collective agreement. Specific reasons: AH permitted for technical or practical reasons or to cope with exceptional surge in work, and agreement of sectoral joint committee generally required. Throughout reference period, number of hours worked may not exceed normal limits by more than 65 hours, without immediate compensatory rest being granted.
Denmark 2002 law implementing EU working time Directive (DK0112158F). Up to 4 months - - 48 -
Finland Working Hours Act (605/1996). Up to 52 weeks - - 40 Sectoral collective agreement (or local agreement if permitted for sectoral agreement) usually required for exceeding statutory working time limits of 8 hours a day and 40 hours a week
France June 1996 'Robien law' on working time reduction (FR9705146F), June 1998 (FR9806113F) and January 2002 (FR0001137F) 'Aubry laws' on working time reduction. Up to 12 months 10 48 or 60 in special cases 35 (maximum of 1,600 per year) Sectoral or company collective agreement required for introduction of AH.
Germany Working Time Act (Arbeitszeit- gesetz) 1994. 24 weeks 10 48 8 per day Collective or works agreements may establish a different reference period or extend hours beyond 10 a day in certain circumstances.
Greece Laws 2639/1998 (GR9807181F and GR9808185F) and 2874/2000 (GR0012192F). Up to 12 months 12 - 40 (38 or 1,748 per year if reference period is 12 months) -
Ireland Organisation of Working Time Act 1997. Up to 4 months, or up to 12 by agreement - - 48 Collective or individual agreement required to extend reference period from 4 to a maximum of 12 months.
Italy Law No. 196/1997 (article 13), ministerial circular No. 10/2000, and legislative decree No. 66/2003 (IT0305305F). Up to 4 months, or up to 12 by agreement - - 48 Collective agreement required to extend reference period from 4 to a maximum of 12 months.
Luxem- bourg Laws of 9 December 1970 and 12 November 1971 as most recently amended by laws of 12 February 1999, 8 March 2002 and 20 December 2002. 1 month/4 weeks or up to over 1 year by agreement 10 48 40 (10 per day) Collective agreement (or ministerial authorisation in absence of agreement) required to extend reference period from 1 month/4 weeks to 1 year or more.
Nether- lands Working Time Act (Arbeids- tijdenwet) 1995 (NL0110102F). 13 weeks Standard - 9; by agreement - 10; special circumstances - 12 Standard - 45; by agreement - 50 (over 4 weeks); special circumstances - 60 Standard - 40. By agreement - 45. Special circumstances - 48 Collective agreement or agreement with works council required to exceed standard rules in all cases.
Norway Worker Protection and Working Environment Act (Arbeidsmiljø- loven, AML) 1997. Individual agreement - up to 1 year; collective agreement - up to 1 year; Labour Inspectorate permit - up to 6 months. Individual agreement - 9; collective agreement - 10; Labour Inspectorate permit - no limits. Individual agreement - 48; collective agreement - 54; Labour Inspectorate permit - no limits. Normal hours. Individual employer-employee written agreement required for basic AH scheme; collective agreement required for higher daily and weekly limits; Labour Inspectorate permit required for no daily and weekly limits (but over shorter period).
Portugal Law No, 73/98 of 10 November 1998 on general organisation of working time (PT9812117N) Up to 4 months or up to 12 by agreement - - 48 Collective agreement required to extend reference period from 4 to a maximum of 12 months.
Spain Royal Decrees 1/1995 and 1561/1995, Laws 39/1999 and 12/2001 Up to 12 months 9 50 40 Collective agreement required for introduction of collective AH (though some individual employment contracts may allow for AH).
Sweden Working Time Act (Arbetstidslagen) 1982 4 weeks - - 40 Variation over reference period allowed where necessary because of nature of work. Derogations from working time rules generally allowed by collective agreement.
UK Working Time Regulations 1998 (UK9810154F) Up to 17 weeks, or up to 26 weeks in certain cases, or up to 52 weeks by agreement. - - 48 Collective agreement (or workforce agreement where unions not recognised) required to extend reference period up to 52 weeks. Workers may 'opt out' of 48-hour weekly limit.

Source: EIRO.

As indicated by table 1, all countries considered have some specific statutory scheme allowing for working hours to be scheduled over a period of at least a month/four weeks, while observing an average. In most cases, the relevant laws or legislative amendments were introduced during the mid- to late 1990s - either general working time legislation incorporating provisions on the flexible distribution and scheduling of working hours, or specific provisions on this point. The relevant legislation was often in response to the 1993 EU working time Directive (and, arguably, to some extent influenced by the European Commission's Green Paper and Communication on work organisation - see above). However, the Directive, while regarded as an impetus for change in working time regulation, does not itself specify a full or clear-cut AH scheme (eg the average weekly hours it permits over a reference period are the same as the maximum hours). Nevertheless, in the cases of Denmark, Ireland, Italy and the UK, the current AH-related legislation essentially merely reproduces the provisions of the Directive. In many countries, some AH schemes had been introduced, often by collective agreement, well before the introduction of legislation on the issue, and indeed such agreed arrangements are often considerably more innovative that the legislative provisions in some countries.

In terms of the details of the statutory AH schemes, a reference period of 12 months (ie annualisation proper) is possible in most countries examined - though a collective agreement is required to introduce this, rather than a shorter statutory reference period, in Ireland, Italy, Luxembourg, Portugal and the UK (an individual agreement is required in Norway). The main exceptions are Denmark (four months), Germany (24 weeks), the Netherlands (13 weeks) and Sweden (four weeks).

During the AH reference period, the maximum daily hours that may be worked are specified in Belgium, France, Germany, Greece, Luxembourg, the Netherlands, Norway and Spain. This limit is generally nine or 10 hours, though higher limits (usually 11 or 12 hours) are allowed in certain circumstances - in some cases requiring a collective agreement - in countries such Belgium, the Netherlands and Norway. The maximum weekly hours during the reference period are laid down in Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Norway and Spain. This is most commonly 45, 48 or 50 hours, though again higher limits (typically 50-60 hours) may apply - in some cases requiring an agreement - in countries such as Belgium, France, the Netherlands and Norway. The maximum average weekly hours which must be maintained over the reference period are laid down in most countries: 35 in France (or 1,600 per year); 38 in Belgium; 40 in Austria (or collectively agreed weekly hours, if shorter), Finland; Greece (or 38 under 'full' annualisation), Luxembourg (and 10 per day), the Netherlands (longer by agreement or in special circumstance), Spain and Sweden; and 48 in Denmark, Ireland, Italy, Portugal and the UK. In Germany, the average to be maintained relates to daily hours (eight).

In the great majority of the countries examined, the law provides for a role for collective bargaining (or in some cases individual agreements) in the implementation of the statutory AH scheme - such arrangements can thus not be introduced purely on the basis of managerial prerogative. The introduction of the statutory scheme essentially requires a collective agreement in Austria, Belgium, France and Spain (where the scheme is collective), while the use of extended daily or weekly hours limits or reference periods as part of an AH scheme requires a collective agreement in Finland, Germany (where the company concerned is bound by a collective agreement), Ireland, Luxembourg, the Netherlands, Norway, Portugal. Sweden and the UK. The level of the relevant collective agreement (company, sectoral etc) is often not specified, but a sectoral agreement is essentially required in Belgium and Finland. Agreements with works councils may play this role in Austria (if permitted by a collective agreement signed with a trade union), Germany and the Netherlands, or with other employee representative in certain circumstances in Finland, France and the UK (where unions are not recognised). Individual agreements with employees may authorise aspects of statutory AH schemes in Ireland (extending the reference period), Norway and the UK ('opting out' of the 48-hour limit for weekly hours). Authorisation by public authorities may be required in certain circumstances in countries such as Luxembourg and Norway.

In all countries examined, AH schemes can be implemented for the whole workforce or a part of it, while the possibility of individualised working time schedules under the terms of a collective agreement is allowed in most countries.

Collective bargaining

In almost all countries considered, collective bargaining has introduced AH schemes of various kinds - see table 2 below. As seen above, legislation in most countries encourages bargaining in this area, but in many cases collective agreements pre-date the relevant legislation (generally adopted in the 1990s) and/or contain provisions which exceed or differ from the legislative schemes. In those countries with the least detailed or specific legislation relating to AH - such as Denmark, Germany, Ireland, Italy, Sweden and the UK - its effect on collective bargaining seems least, with agreements on AH of some kind often thriving irrespective of the statutory provisions. The greatest influence of legislative change in stimulating AH bargaining seems to be found in France and Luxembourg.

Table 2. Collective bargaining on annualisation/working time variation schemes
Country Main features
Austria Many sectoral agreements provide for various AH schemes - often allowing variations only over a few weeks, but sometimes over 12 months under a 'bandwidth' model - leaving detailed implementation to company-level works agreements (between management and works council). For example, averaging over 12 months is allowed under agreements in sectors such as metalworking, paper production, construction, ceramics and information technology. Such schemes are not always taken up in works agreements, but where they are, agreements typically provide for a 13-52 week reference period, during which weekly hours may be as high as 40, if the 38.5-hour norm is maintained on average.
Belgium Many sectoral agreements provide for AH schemes, often linked with working time reductions, while referring details of implementation to company level. Examples of such agreements include: clothing and garment manufacturing (blue-collar workers); chemicals (blue-collar); food retail (white-collar); banking; and healthcare.
Denmark AH schemes are provided for by the industry sector agreement, the largest in the private sector, as well as the agreements in insurance and some parts of the public sector. These provide for a 37-hour week to be maintained on average over a 12-month reference period, subject to a 48-hour weekly upper limit (which may, rarely, be exceeded by local agreement) with detailed implementation to be agreed locally.
Finland Many sectoral agreements provide for AH schemes, with a 12-month reference period relatively common - as in the graphical, chemicals and metalworking industries - plus daily and weekly upper limits in many cases. Within this framework, company-level bargaining on AH is often allowed by sectoral agreements.
France Under the influence of legislation, collective agreements at sector and company level now very commonly provide for AH schemes, with a 35-hour week maintained on average within weekly limits, usually over a 12-month reference period.
Germany Numerous sectoral agreements and company-level works agreements provide for various AH schemes, often in the form of annual working time accounts and flexible weekly working time.
Greece There are virtually no collective agreements on AH schemes, with the only exceptions being a handful of company agreements in manufacturing industry.
Ireland There are some company-level agreements on AH, notably a few high-profile annualisation deals at relatively large manufacturing firms such as Aughinish Alumina, Shannon Aerospace, SIFA and Honeywell. Recent attempts to introduce AH agreements in parts of the public sector - such as the prison service - have proved problematic.
Italy AH schemes of a kind - in the form of 'multi-period work schedules' (whereby the number of weekly hours worked may vary around an average during certain periods of the year) - feature in all sectoral agreements. Some sectoral agreements - as in chemicals, metalworking, banking, textiles, commerce and local government - provide for 'hours banks', while only the chemicals agreement provides for a fully annual working time schedule (with 247.5 working days per year and weekly working time varying around an average of 37.75 hours, within limits). Supplementary company-level agreements may elaborate on some aspects of the sectoral AH provisions.
Luxembourg Under the influence of legislation, around four out of 10 (mainly company-level) agreements concluded in recent years have provided for AH schemes, allowing averaging of working hours over a period of between four weeks (most common) and a year (less common, and mainly among craft workers such as electricians, installation engineers, painters and roofers).
Netherlands Only a relatively small minority of (mainly sectoral) collective agreements provide for AH schemes exceeding the statutory norms, for example in terms of higher average weekly hours during the 13-week statutory reference period. Only a few agreements provide for full annualisation - examples are those wood-trading and meat-processing. At company level, agreements with works councils often elaborate on the working time provisions in sectoral agreements, which may include AH arrangements.
Norway Only a minority of sectoral agreements provide for any form of AH, though some explicitly refer to the relevant legislation (the AML) on this point and thus allow, at least in theory, hours-averaging over a reference period, while a few allow averaging but with stricter rules (eg on reference periods) than in the AML. In the 2002 bargaining round, the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the Confederation of Norwegian Business and Industry (Næringslivets Hovedorganisasjon, NHO) agreed to 'allow for the calculation of average working time according to the rules of the AML'. This phrase was incorporated into all the agreements to which LO and NHO are party, and in a number of other agreements in the private sector. In the public sector, AH in the form of 'flexible hours' is widely regulated and practiced. Thus there are now relatively few agreements that severely restrict or prevent AH.
Portugal There are no known sectoral agreements that provide for AH schemes, and the matters is dealt with in only a few company-level agreements, mainly in firms operating shift systems (generally in 'traditional' labour-intensive industries), in the motor industry (to cope with the seasonality of the market), or for skilled workers who are exempt from fixed working hours rules. Examples of company agreements providing for some form of annualisation include those at SSGP-Vidro Automóvel, Covina, Unicer and Volkswagen Autoeuropa.
Spain The majority of sectoral and company-level agreements now provide for AH schemes. The main forms are annualised calculation of working time and irregular distribution of working time over a reference period (sometimes requiring the involvement/agreement of workers' representatives).
Sweden The two most recent major bargaining rounds - in 1998 (SE9806190F) and 2001 (SE0105102F) - have resulted in some 20 sectoral agreements (eg in the paper and pulp industry) which deal with annual working time accounts or banks. The sectoral agreements allow for such such schemes to be negotiated at local level, as one of a range of possible flexibility arrangements.
UK Most collective bargaining occurs at company or lower (site/workplace) level and this is true of agreements on AH schemes. Most such schemes are indeed thought to be based on negotiation or consultation with trade unions. Annualisation is particularly prevalent in the education sector, electricity, gas and water supply (with notable agreements including those at Welsh Water, Scottish Power and Hyder Utilities) and manufacturing (eg Peugeot, Samsung Electronics and ICI).

Source: EIRO.

In many countries, the pattern for the introduction of collectively-agreed AH schemes is that the basic parameters are laid down in sectoral agreements, with their concrete implementation referred to agreement at company or workplace level, between management and local trade unions or works councils (as in Austria). This is the case in Austria, Belgium, Denmark, Finland, France, Italy, the Netherlands, Spain and Sweden. Sectoral agreements which do not require subsequent company-level application seem rarer, but seem to exist in France, Germany, Italy, Norway and Spain. In countries where sectoral bargaining on any issues is rare - Ireland, Luxembourg and the UK - company or lower-level agreements play the main role in introducing AH.

Sectoral agreements on AH schemes of some kind seem widespread in Austria, Belgium, Denmark, Finland, France, Germany, Italy and Spain, and exist but are less prevalent in the Netherlands, Norway and Sweden. Where these agreements require lower-level implementation, this does not necessarily occur in all cases - for example, in Austria, works agreements to implement the sectoral provisions are not widespread. Company or lower-level agreements on AH - either independent or in implementation of sectoral provisions - seem relatively common in Belgium, Denmark, Finland, France, Germany and Spain. They exist, but are clearly a minority practice in Ireland, Luxembourg, the Netherlands, Sweden and the UK, whereas in Greece and Portugal the little bargaining on AH that occurs is (despite the existence of sectoral bargaining in these countries) at company level. For further details of the coverage of AH schemes, see below under 'Coverage'.

It should be noted that the AH schemes provided for in collective bargaining take a large number of forms, such as working time accounts and banks in Germany, Italy and Spain. Most commonly, the agreed provisions allow for hours-averaging over a reference period, which is by no means always annual. However, 'full' annualisation or 12-month reference periods seem widespread among AH schemes in Denmark, Finland, France and the UK, and relatively common in Austria and Germany, though rare in Italy, Luxembourg, the Netherlands and Norway, for example. It seems relatively common in some countries (eg France and the UK) for the negotiated introduction of AH to be accompanied by an overall reduction in working time.

Conclusions

From the evidence it appears that AH:

  • is a relatively recent innovation in the way working time is organised and distributed, in contrast to more traditional forms of working time scheduling like overtime, shiftwork or temporary staffing;
  • is usually based on collective agreements (though often within a legislative framework); and
  • is closely tied to organisational needs and industrial relations dynamics at local, enterprise, plant or establishment level.

While there is some form of legislative framework for AH schemes in all countries examined - which is frequently broader and less detailed than the rules on issues such as overtime and shiftwork - and the issue is often dealt with in some way in sectoral collective agreements, the actual details of such arrangements are generally laid down in collective or similar agreements at company or workplace level, which differ greatly in terms of their content. This makes it very difficult to categorise national models of AH, as the schemes in use may differ between and within sectors in each country. The diversity is such that distinct AH models are hard to define, with AH serving as an 'umbrella' term for the various forms of calculating working time over a greater period than a week currently used by many organisations across Europe. AH is part of a multiple terminology for alternative working time policy tools that has evolved over the years - such as the 'bandwidth' model, working time accounts or time banks, time corridors, compressed working weeks, flexi-years, rostered and reserved annual hours etc.

Nevertheless, the institutional framework and the industrial relations and collective bargaining systems of each country undoubtedly affect the prospects of AH contracts and agreements. In some countries with high level of bargaining coverage and relatively dynamic (and largely sector-based) bargaining systems, agreements on AH arrangements seem to have developed largely independent of any specific legislation on the issue (though within legislative provisions on matters such as maximum hours) - examples include Denmark, Finland, Germany, Italy, Spain and Sweden. In countries with essentially company-level bargaining only and little or no specific legislation relating to AH - notably Ireland and the UK - agreements on AH have also developed independently, but arguably in a more piecemeal way. However, in countries such as France and Luxembourg, recent legislation son AH seems to have played a major role in stimulating agreements on the subject. By contrast, recent legislation does not appear to have had a major stimulating effect in Austria (where AH was already relatively common) Greece or Portugal (where AH was and remains rare).

Coverage

The development of annualised working time has been relatively recent in Europe, with the first initiatives -in the form of pilot projects - reported in the Swedish paper and pulp industry in the mid-1970s. These experiments appeared to have some echoes in the following years in a number of other countries, such as France, Germany and the UK - for example, an enabling agreement on annualisation was concluded (unusually in the British context) at sector level in the UK paper and board industry in 1982, following a study of the Scandinavian experience in the sector. The 1980s saw the spread of various AH schemes in a number of countries, such as Austria, but it was probably not until the 1990s that AH emerged as a relatively widespread phenomenon in many countries (though arguably the issue has not received as much attention in research as other aspects of working time organisation), with a renewed upsurge in some cases since the late 1990s - though not in all cases (eg the number of workers with annualised hours in the UK fell appreciably over the 1990s in the UK, before rising again from 1999).

There is currently only very limited statistical information available as to the level of coverage of employees by AH schemes in the countries examined, though with exceptions such as Germany and the UK and, to some extent Denmark, Finland and France. Relevant questions on annualised hours arrangements appear to be included in official national labour force surveys or similar only in the UK, Germany and Finland (on a one-off ad hoc basis in 2001), while the Eurostat Labour Force Survey does not cover this issue. Some indications of coverage levels are provided by data on the contents of collective agreements (see table 2 above), where these are collected by official or other sources. However, as seen above, such arrangements are usually decided or implemented at company/workplace level and even in countries where collective agreements are officially registered with various labour authorities, this may not always apply to lower-level agreements (as, for example, in Sweden), or the contents of agreements may not be analysed by the relevant authorities. In countries where sectoral agreements on AH require workplace-level implementation - such as Austria and Sweden - the extent to which this occurs in practice is hard to measure.

Table 3 below provides what information is available, from nine countries, on the number/proportion of employees covered by AH schemes. In some cases the information is partial (eg referring only to particular sectors) and there is considerable variation on the particular types of AH schemes covered by the data (eg sometimes they refer to 'full' annualisation and sometimes to specific or general hours-averaging or accounting schemes) - this makes any kind of comparison difficult.

Table 3. Data on number of workers covered by AH schemes
Country Main features
Austria Little information available, but with regard specifically to annualisation in the form of a 12-month 'bandwidth', the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB) estimates that between 10% and 20% of employees covered by collective agreements providing for such schemes (which is by no means all agreements) actually work under this model.
Denmark According to statistics from the Danish Employers’ Confederation (Dansk Arbejdsgiverforening, DA), the main private sector employers' organisation, 67% of the 650,000 workers employed by its member companies have access to fully annualised working hours (ie calculation over a 12-month reference period). In addition, the AH agreement in the insurance sector covers around 20,000 employees. No exact figures are available for the public sector and agriculture.
Finland A 1998 joint working time report by the social partners found that in 1997, some 200,000 workers were covered by a collective agreement providing for an AH scheme with a 12-month reference period. Furthermore, the Statistics Finland labour force survey for the second quarter of 2001 found that 300,000 employees (14.4% of the total) had 'period work' (ie averaging over a reference period) or 'compressed work' schedules (with longer daily working time, compensated by longer continuous time off). Of the 140 collective agreements to which the sectoral associations of the Confederation of Finnish Industry and Employers' (Teollisuus ja Työnantajat, TT) are party, over 50 provide an opportunity for hours-averaging over a 12-month reference period, covering around 50% of blue-collar workers and 90% of white-collar workers employed by TT's member companies.
France An official review of the implementation of the 'Aubry' 35-hour week laws (FR9806113F and FR0001137F) in 2002 estimated that 35% of employees had had their working time reduced in the form of annualisation (FR0210106F). In some industries, such as construction, it was the most common form of working time reduction.
Germany Research conducted in 2001 found that 40% of employees were covered by a working time account and 28% had annual working time accounts.
Italy There is no information on the number of workers covered by the 'multi-period work schedules' and 'hours banks' schemes provided for by most sectoral agreements (see table 2 above). The only 'full' annualisation scheme is that laid down in the chemicals sector agreement, and in this industry 75.2% of workers had annual working time arrangements in 2000.
Spain Little information available, though in 2002 some 45.5% of workers were covered by collective agreements providing for the possibility of irregular distribution of working time.
Sweden According to the Mediation Authority (Medlingsinstitutet), there are currently about 200,000 employees in private sector industry covered by collective agreements allowing for local negotiations on the establishment of working time accounts, but it is not known how many are actually working under such schemes.
UK The spring 2001 official Labour Force Survey found that 842,000 employees, or 4.9% of the total, worked annualised hours - see table 4 below.

Source: EIRO.

Drawing together all the available information, the countries examined can be divided into four main groups in terms of the importance of AH schemes:

  • countries where AH schemes of some kind cover a substantial proportion of the workforce (thought to be approaching a third or more) - Denmark, France, Germany and Spain;
  • countries where AH schemes are relatively widespread, covering a quite low but not insignificant proportion of the workforce - Belgium, Finland, Italy, Luxembourg and the UK;
  • countries where AH schemes exist but do not have wide coverage -Austria, Ireland, the Netherlands, Norway and Sweden; and
  • countries where AH schemes are virtually non-existent, with only a few examples - Greece and Portugal.

Given the lack of accurate data, this classification is tentative and the lines between the groups may be blurred, while there may be considerable sectoral variations within countries (eg full annualisation covers the great majority of workers in the Italian chemicals industry, but is essentially limited to this industry in Italy).

As noted above, the nature of AH schemes is somewhat hard to assess in most countries. The legislative framework mainly sets down a number of 'default standards' for AH schemes (see table 1 above), or establishes some parameters, while multi-employer collective agreements are more detailed on the nature of the schemes (see table 2 above). However, the details and implementation of AH schemes are almost invariably laid down at the level of the individual company or workplace, tied to organisational needs and the interests of the local parties. This unknown 'black box' aspect of AH is reinforced by the lack in most countries of accurate data on its dissemination and, even more so, on its distribution in sectoral, occupational or gender terms.

With regard to the sectoral distribution of AH arrangements, detailed information is rare, but one notable exception is the UK, where the official labour force survey covers this point - set out in table 4 below. The data indicate significant sectoral variations, with annualised hours most common in agriculture and least widespread in mining and quarrying. Manufacturing and education together represent over 40% of all workers with annual hours.

Table 4. Annual hours by sector, UK, 2001
Sector No. of employees % of employees
Education 147,000 11.7
Electricity, gas, water supply 13,000 7.5
Manufacturing 202,000 5.4
Health and social work 80,000 5.2
Transport, storage and communication 75,000 5.2
Other community, social and personal 35,000 5.0
Wholesale, retail, and motor trade 90,000 4.5
Financial intermediation 40,000 4.3
Construction 38,000 3.3
Public administration and defence 48,000 3.3
Hotels and restaurants 13,000 2.9
Real estate, renting and business activities 58,000 2.9
Mining and quarrying 2,500 2.5
All 842,000 4.9

Source: Labour Force Survey, spring 2001, cited in 'Annual hours', IDS Study 721, Incomes Data Services (IDS), 2002.

While such comprehensive data are not available from all countries, the available evidence indicates that AH schemes are often found in various sectors of manufacturing industry. For example, the Danish industry sector collective agreement (the country's largest) provides for an AH scheme, while 2000 research in Germany found that 37% of companies in manufacturing had annual working time accounts (compared with an overall average of 28%), and the few examples of AH in Greece and Portugal are found mainly in manufacturing. Examples of industrial sectors which relatively often use AH schemes include: metalworking and notably motor manufacturing (eg in Austria, Finland, Italy); paper and pulp (eg in Austria and Sweden); textiles (eg in Belgium and Italy); chemicals (eg in Belgium and Finland); and graphical/printing (eg in Finland). The reasons for the relatively frequent use of AH in manufacturing may relate to the particular characteristics of the way work is traditionally organised in industry, as well as the high degree of competition to which manufacturing companies are often exposed - many industrial sectors have continuous production processes and face variable and unpredictable demand.

However, AH schemes are by no means restricted to industry. Recent trends suggest that AH may also be increasingly used in the private service sector. In Germany, research in 2000 found that 14% of services companies used annual working time accounts, while specific examples of the presence of AH in services include insurance in Denmark, hotels/restaurants in Finland, food retail in Belgium and banking in Italy. Construction is prominent in its use of AH in countries such as Germany (with 57% of companies found to have annual working time accounts in 2000), perhaps connected with the high degree of volatility and constant fluctuations in economic activity that characterises this industry.

With regard to comparisons between the private and public sector, it seems that the tendency for the state to encourage the social partners to implement AH schemes detected in the regulatory framework in many countries (see above under 'Legislative framework') may be carried over in some cases to the state's role as an employer (in public services and utilities). For example, as noted above, in the UK annualised hours are most common in education, with health and social work also recording an above-average score, while in Italy the collective agreement for local government provides for AH. In Finland, AH arrangements - such as 'period work' (ie averaging over a reference period) or 'compressed work' schedules (with longer daily working time, compensated by longer continuous time off) - are much more common in the public sector, and especially in the municipal sector, than in the private sector - see table 5 below. Incidentally, the Finnish figures are among the very few to be differentiated by gender - indicating that women are more likely to have AH than men in the municipal sector and much less likely to do so in the central state sector, with little difference in the private sector.

Table 5. No. and % of employees covered by AH arrangements, by broad sector and gender, Finland, 2001
Sector Males Females Both sexes
Central state 17,000 (23.1%) 4,000 (6.0%) 21,000 (15.0%)
Municipal 20,000 (16.8%) 104,000 (26.8%) 124,000 (24.4%)
Private 94,000 (11.0%) 60,000 (10.2%) 153,000 (10.7%)

Source: Statistics Finland Labour Force Survey 2001.

Note: Figures cover arrangements such as period work and compressed work schedules (see main text for definitions).

The explanation for the inroads made by AH in the public sector (broadly defined) in some countries probably lies in the changing employment policy in the sector witnessed across much of Europe during the 1980s and 1990s, with wider restructuring exercises such as privatisation, market testing and compulsory competitive tendering resulting in a new, more flexibility-oriented culture of managing industrial relations. As such, AH schemes could in some cases be implemented in the public and former public sector with greater ease than previously. For example, in the UK privatisation and termination of national bargaining arrangements facilitated the introduction of annualised hours in electricity, gas and water companies in the early 1990s - examples include Welsh Water (1991) and Scottish Power’s Cockenzie power station (1993-5) (an above-average 7.5% of employees in UK electricity, gas and water supply now have annualised hours - see table 4 above).

However, the introduction of AH arrangements in public services and enterprises has on some occasions been accompanied by industrial disputes. For instance, in the Irish prison service, a conflict is in prospect in 2003 over the government's insistence on introducing a new annualised hours system to replace the current high levels of overtime. Another example is Olympic Airways, the semi-public Greek airline, where an AH-related reorganisation of working hours introduced unilaterally by management without the conclusion of collective agreement (as permitted by 1998 legislation - GR9804166F) provoked opposition from trade unions.

A final aspect of the dissemination of AH across Europe is that such arrangements often appear to be more common in larger organisations. An important factor is that, as noted above (under 'Regulation'), collective and similar agreements are often required for the introduction of AH schemes and collective bargaining structures tend to be much more developed in larger workplaces, where trade unions' presence and activity tends to be greater (often safeguarded by law) and they are often better organised. Clear evidence on this point is provided by survey evidence from Germany, where a 2000 study (involving 19,000 companies) by the German Association of Chambers of Industry and Commerce (Deutscher Industrie- und Handelstag, DIHT) demonstrates a positive correlation between the use of flexible working time arrangements, including AH, and workforce size - see table 6 below.

Table 6. Incidence of flexible working time arrangements by company size, Germany, 2000
Workforce size Lifetime working accounts Flexitime without core hours Flexitime with core hours Annual working time accounts Flexible weekly working time
1-19 1% 6% 14% 17% 28%
20-199 1% 5% 25% 33% 27%
200-999 3% 12% 52% 41% 33%
1,000 and over 5% 21% 64% 47% 42%
Total 1% 7% 25% 28% 29%

Source: DIHT 2000.

Impact

The lack of statistics on AH arrangements makes it extremely difficult to assess their impact in areas such as level of overtime working, employment levels, company performance, pay or other employment and working conditions. However, there is some partial evidence on a number of these points.

Overtime

In theory, AH schemes should reduce the amount of overtime working paid as such, in that in many such schemes weekly or daily hours may exceed normal thresholds for overtime without attracting a pay premium, if compensated at another time during the reference period. Indeed the reduction or avoidance of overtime is a stated aim of some AH schemes (as in companies in the Portuguese motor manufacturing and brewing industries). However, there is generally little clear evidence on the relationship between the use of AH and the amount of overtime worked. At company level, a reduction (sometimes substantial) in the amount of overtime worked is reported in firms operating AH schemes in Finland, Ireland and Italy, while in the UK a 1998 survey of 23 organisations with annualised hours found that 16 reported less overtime working after implementation. More wide-ranging survey evidence from Germany and the UK also points to a correlation between AH schemes and reduced overtime. German research published in 2002 found less paid and unpaid overtime among workers covered by various forms of flexible working time account, whereas a UK analysis of labour force survey data suggests that annualised hours are associated with a reduction of over 50% in paid overtime. In France, as a consequence of annualisation, overtime has become a rarity, as an employee can work a 48-hour week for no extra pay. However, industry-level data from Finland do not indicate any impact of AH on overtime levels, while overall statistics from Spain indicate that the total amount of overtime has remained practically constant across the economy in recent years, at a time when annualisation has increasingly been introduced.

In most countries, however, there is little evidence on this issue, and the use of overtime may be more influenced -as suggested by a recent EIRO comparative study on overtime (TN0302101S) - by issues such as specific labour shortages, low wage levels in some countries (eg Greece and Portugal) and a lack of other means of achieving labour flexibility.

Beyond overtime, the influence of AH schemes on other aspects of working time organisation is again hard to assess. There is some evidence that it has an effect on shiftworking practices - for example, UK companies with annualised hours have been found to be more likely to operate complex shift patterns, weekend and public holiday working, or to introduce longer shift times in return for longer blocks of leave. A notable effect of annualisation recorded in France has been the diversification of work timetables. In a 1998 survey, 9.2% of employees (mostly white-collar workers) stated that they did not have 'usual' hours of work, compared with 7.4% in 1984. In 1998, only 49% of employees had fixed working timetables, compared with 65% in 1978, while 15% did not work the same number of days every week, up from 11% in 1984, and occasional weekend work has also become more widespread.

Pay

The impact of AH on pay levels is an other issue on which information is scarce, but the issue is clearly linked with overtime in many cases - a reduction in hours counted as overtime is likely to mean the loss of the premium pay rates for such work. For example, it is reported from France that the implementation of annualisation has, de facto, reduced wages in some industries where considerable overtime had previously been worked, while in Italy the scheduling of working hours on an annual basis is reported to have considerably reduced wage levels, because workers have had to forgo overtime pay premia. The key factors in such cases are obviously the amount of paid overtime before and after the introduction of AH, and the way and rate at which overtime work are remunerated in particular countries, sectors and companies (TN0302101S). However, it is reported from countries such as Denmark, Ireland, the Netherlands and the UK that such losses of overtime payments may be offset by increases in basic pay rates. For example, an analysis in the UK (Annualised hours contracts: The way forward in labour market flexibility?, David NF Bell and Robert A Hart, University of Stirling, 2002) has found that the hourly wage under an annualised hours contract is around 13% higher than under an equivalent standard contract, reflecting higher productivity and compensating for 'abnormal' work scheduling and short-notice calls. It is also noted in the UK that the introduction of annualised hours may involve a switch to 'salaried' status for employees, with the consolidation of some part of bonus pay and other enhancements.

Where AH is introduced on an individual employee basis or for only specific groups of employees, this may increase wage differentials.

Working and living conditions

The effects of AH schemes on the broader working and living conditions of employees can be both positive and negative (though once again, information on this point is limited).

On the plus side, AH schemes may often be accompanied by a reduction in working time and an increase in time off - as, for example, in Ireland, Italy and the UK - and workers may have more control over when they take time off. For example, German research indicates that that almost half of all employees with working time accounts regard them as improving their 'time sovereignty', helping them to organise working time more in line with their individual needs and interests, whereas only about a quarter feel that the accounts involve more problems than benefits. AH schemes which enable workers to take time off without using annual leave entitlement may help employees deal with minor family and private matters which arise. Furthermore, variations in work schedules may be more predictable, helping employees plan their life outside work better.

On the minus side, AH schemes may involve more unsocial hours - eg at night and at weekends - requiring workers to make major changes to their everyday lives. Some countries also report a link between AH and work intensification, as in Spain (though no coherent link has been found in Ireland). Varying working hours may also entail problems for employees in maintaining a good work-life balance, with AH schemes constituting a serious constraint if they often involve major changes to the organisation of an individual’s day, and if there are short notice periods for alterations to schedules.

One of the few significant items of research in this area is a survey conducted by the French government in 2002 on the views of employees as to the effects on their working and home lives of the implementation of the country's working time reduction legislation, which in many cases has taken the form of annualisation (FR0210106F). Around 60% of those surveyed said that the changes had led to an improvement overall, while only 15% said the opposite. However, this positive overall judgment concealed very mixed evaluations that differ widely depending on the workers’ qualifications and gender. Female managerial staff were the most satisfied group (73% reported an improvement), while unskilled female workers were the least content (40%). A similar, albeit less marked, contrast existed among men with different levels of qualification (65% for managerial staff, as against 57% for unskilled workers). Looking only at working conditions, the response was clearly more qualified. Here again, it was senior managerial staff and middle management (both male and female) who most often perceived an improvement in their working conditions due to the transition to the 35-hour week. The employees who were most likely to believe that their working conditions had worsened were manual and unskilled workers, who were more likely than others to have had their working time annualised. The reduction of working time had generated wide-ranging organisational changes which, considering the time and production constraints on these workers and the few new jobs created in these categories, had led to the intensification of work and a worsening in working conditions.

Overall, the impact of AH on working and living conditions has yet to be explored in detail. The data available indicates that crucial themes include the notice periods for altering working time schedules, work intensification and rhythms, and unsocial hours. Evidence from Spain indicate that the spread of AH and other forms of flexibility mean that young workers and others on 'atypical' contracts may be especially vulnerable in terms of being unable to control the scheduling of working hours and workload. Along with the French research findings, this suggests that increased working time flexibility in the form of AH could lead to prospects of greater labour market segregation, to the disadvantage of groups such as younger, female and unskilled workers.

Employment

The effect of AH schemes on employment levels is again an area in which concrete information is very limited. There seems to be little evidence that AH actually creates jobs - though if such schemes improve companies' competitiveness (see below) this might be a long-run consequence - but there are indications that it can help save existing jobs and make precarious jobs more secure. A beneficial effect on job security for existing staff is reported from Germany and Ireland, for example, while AH is seen as promoting open-ended employment over temporary jobs in France, Italy and Spain. While the flexibility inherent in AH schemes mean that employers may be able to avoid recruiting additional employees during periods of high demand, conversely they may have a reduced need to shed workers during downturns. The overall effect my thus be to increase employment stability.

Company competitiveness and performance

The same basic presumed business benefits of AH schemes are reported from many countries. They allow for flexible distribution of working time to meet changing levels of market demand (without recourse to overtime remunerated at a premium rate), increasing productivity, improving plant utilisation and cutting costs - particularly labour costs (notably those associated with overtime payments). AH may thus contribute to improving companies' competitiveness, performance and profitability. Employers are reported as perceiving such benefits in countries such as Denmark, Finland, Germany, Ireland, Italy, Spain and the UK. For example, the Spanish Confederation of Employers’ Organisations (Confederación Española de Organizaciones Empresariales, CEOE) stated in 2002: 'With regard to the organisation of working time, the ability to adapt the needs of the company to the market demands is closely linked to the available margin for distributing the working time of its workers. Annualised and flexible working time are an ideal instrument for improving the ability to adapt.'

However, the evidence on these benefits appears to be lacking in most cases. One exception is a 1998 joint working time report from the Finnish social partners which found, based on a firm-level survey by the Confederation of Finnish Industry and Employers (TT), that flexible working time arrangements have a positive impact on firms' competitiveness.

Social partners' views and strategies

Table 7 below summarises the main potential benefits and drawbacks for employers and employees/trade unions as expressed by the social partners in the countries examined, and in the literature and research in this area. Given the wide variation of the various AH schemes in operation, by no means all of the pros and cons are identified in all countries, and some of the same issues appear as both benefits and drawbacks. Some of the effects listed may be more likely than others.

Table 7. Main potential benefits and drawbacks of annualised hours schemes
For employers For employees and trade unions
Benefits
Matching hours more closely with production or service requirements. Reinforcing employment stability.
Better exploitation and increased productivity of human and capital resources (eg through improved plant utilisation). Guaranteeing a stable income.
Increased ability to forecast future workloads (peaks and troughs of product demand). May increase basic pay and entitlement such as leave or sick pay.
Better budgetary planning, with more predictable costs. Greater scope for employee control over the organisation of working hours (with a possible restriction on managerial prerogative)
Increased ability to cut overtime and associated premium pay rates, thus cutting labour costs. Greater predictability of working time.
Reduction of absence from work (eg by withdrawing premium payments for overtime and encouraging peer pressure for attendance). Improved reconciliation of work and family life.
Reduction in labour turnover. Better planning of employees' leisure time, with longer blocks of time off.
Increased ability to gain exemption from legal working time restrictions (eg restrictions on maximum hours or Sunday working). May be accompanied by cuts in agreed (or actual) working time.
Increased ability to cope with rising costs arising from statutory or collectively agreed working time reductions. May reduce precarious employment and use of external staff/outsourcing.
May act as a catalyst for more innovative changes at the workplace. May provide basis for harmonising terms and conditions for blue-collar and white-collar employees (if applied to whole workforce).
May institutionalise consensual bargaining procedures and a culture of 'acceptance' from trade unions (with a possible extension of managerial prerogatives). Provides arena for employee representatives'/trade unions' involvement (especially where local agreement required for AH implementation).
Drawbacks
May require negotiations with trade unions for implementation (with a possible restriction on managerial prerogatives). Pay cuts if overtime lost and no accompanying increase in basic pay.
Possible loss of control over some aspects working hours (with a possible restriction on managerial prerogatives). More unsocial hours worked without associated premia (especially loss of overtime income).
Complicated administrative procedures and associated costs involved in managing AH schemes. Work intensification, especially in certain periods.
Problems when employees are not willing to work extra hours at short notices. Loss of control over actual amount of hours spent at work (especially in case of individualised contracts).
Possible loss of 'human capital', in the sense of fewer overtime hours worked by experienced staff. Problems with reconciling work and family life
. Excessive fluctuations, possibly at short notice.
. May freeze working time duration, in contrast to trade union demands for working time cuts.
. Possible individualisation of working time norms and other rules governing employment relationship.
. Possible differentiated working time rules and remuneration structures within company workforce (labour market segmentation).
. May promote decentralisation away from multi-employer collective agreements.
. May be antagonistic to trade union forms of employee representation.

Source: EIRO.

As the table indicates, there are potentially both benefits and drawbacks for both employers and employees/unions. This suggests that it is inappropriate to adopt an ideological approach to the issue, regarding it as either a panacea or part of an employer-driven attack on employees' terms and conditions. The key issue is the nature of the AH scheme and the way that it is implemented at a particular workplace, especially in terms of trade-offs between employers' and employees' interests (eg the flexibility of annualisation may be traded for a cut in employees' overall working time).

In their basic features - ie allowing a more flexible distribution of employees' working time to meet company production and service provision needs - AH schemes arguably offer more advantages, and more tangible ones, to employers than to employees (see table 7 above). It is reported from a number of countries (such as Denmark and Ireland) that annualisation is widely seen as being an 'employer-friendly' form of flexibility, and it is usually the case that AH schemes are proposed or instigated by employers. In order for employees to receive most of the clearer benefits, certain conditions must be met and certain additional or accompanying features must be added to the AH scheme (for example, an increase in basic pay to make up for the loss of overtime premia, or a cut in overall working time).

While employers are largely in favour of AH - though this varies between and within countries (as evinced by AH's patchy dissemination), and depends on matters such as AH's suitability for particular industries or companies, and the existence of other forms of achieving working time flexibility - the views of trade unions are more varied. In some countries, often those with a strong collective bargaining system, a degree of consensus would appear to have been built up between unions and employers over the implementation of AH and the balance of advantages for employers and employees/unions, producing a 'win-win' situation. This appears to be the case in countries such as Germany, Italy and Austria. Elsewhere, some unions (like a number of French confederations) are opposed to annualisation, but the dominant approach appears to be pragmatic, and it is the negotiation of the accompanying compensatory measures for employees which is arguably unions' key concern in practice. Unions in many countries are extremely sceptical and cautious about introducing or extending AH without a real trade-off for their members. However, their ability to do so varies according to the specific situation in individual countries, sectors or companies.

The fact that there are numerous collective agreements on AH across many of the countries examined implies that trade unions have often been able to negotiate arrangements which they see as being in their members' interests. However, the capacity of unions to negotiate the introduction of AH measures to the greatest advantage of employees may currently be hampered in some countries by broader developments. Unemployment levels remain persistently high in many EU countries, especially among certain segments of the workforce, resulting in the existence of a substantial minority of people prepared to accept 'non-standard' working hours (as suggested, for example, in 'Working time', G Bosch and S Lehndorff, in European labour relations Volume 1, Gyorgy Szell (ed), Gower, 2001). This may make it difficult for employees to demand and achieve working time arrangements that meet their preferences relating to both income and leisure. Furthermore, while the introduction of working time flexibility was previously frequently accompanied by cuts in its duration, in most of the EU the tendency to cut working time at a general level by legislation and agreement has stagnated (though with some exceptions) (TN0303103U). At the same time, working time arrangements have become more differentiated across the workforce and their regulation has increasingly been delegated to workplace or establishment level.

Overall, the social partners' views and strategies on AH reflect conditions in particular countries, sectors and companies. This may relate to: the nature of sectors and companies' operations; the labour market situation; the regulatory framework and the degree of leeway this allows for AH and other forms of flexibility; bargaining structures; and other industrial relations areas such as pay determination and forms of employment. These views and strategies may differ at different levels of the social partners' organisations, and the decentralisation of regulation to company or workplace level implied by many AH schemes means that the positions of individual employers and local trade union organisations are particularly important. For example, a national union confederation might take a negative overall view of AH, while an individual local union may be willing to accept it in a particular company in order to deal with specific circumstances or meet employees' wishes.

Debate and future prospects

The EU debate and discourse on working time, promoting flexibility via measures such as annualisation - through initiatives such as the Employment Guidelines and subsequent National Action Plans on employment, and the Green Paper and Communication on modernising work organisation (see above) - seems to have had a mixed, and generally rather indirect, effect on national AH developments. A clear impact is reported only in a few case, such as Finland, Ireland and Italy, and it seems more common for the EU debate to have acted as one of a number of influences towards a general trend which was already underway, at most acting as a catalyst for further AH initiatives. The direct effect would appear to be least in countries where national debate and initiatives have their own, often strong, dynamic - such as Austria, Denmark, France, Germany and Sweden.

In broad terms, it seems that the basic driver of AH is initiatives at local level, where developments are largely pragmatic and in some ways independent of debates and initiatives at national or international level. However, local bargaining does not exist in a vacuum and is embedded in the national institutional framework (which may play a key role in enabling AH agreements at a lower level) and in the overall industrial relations environment. This national context is itself influenced by the EU discourse on AH as a means of adapting work organisation to the increasing internationalisation of the economy and intensified competition. In this sense, EU initiatives appear to have a definite through rather indirect influence on the issue of working time regulation in all countries examined.

The future prospects of AH seem to vary across the 16 countries considered, not least because the dissemination of such schemes at present varies so widely (see above under 'Coverage'). However, given the overall trend towards more flexible organisation and distribution of working time, a likely future decrease in the coverage of AH schemes is not reported from any country. In France and Germany - and to some extent, Austria - where AH schemes are already relatively widespread, it seems that further growth may be limited. In Sweden, where a number of sectors are covered by AH schemes, their further extension does not seem to be high on the social partners' agenda at present. By contrast, in countries such as Belgium, Denmark, Finland, Ireland, Italy, Spain and the UK, it appears that AH schemes may continue to spread, or are doing so already. Finally, in countries such as Greece, the Netherlands, Norway, and Portugal, where AH is currently relatively limited, any future growth prospects seem tentative or uncertain. Across Europe, developments in other areas of the labour market and industrial relations, such as the regulation of overtime and other forms of working time flexibility, pay trends and unemployment, seem likely to play a major role in the way annualised hours evolve in the future.

Commentary

A key point highlighted by this study is that in almost all countries examined, there is very little statistical evidence on the extent of annualisation and few empirical studies into its operation. Furthermore, the idea of annualised hours encompasses a wide range of differing practices that are hard to categorise and compare. Any findings should thus be treated with care. However, the main points to emerge from our examination of the situation across the EU and Norway are as follows.

  • All countries examined have some specific statutory scheme allowing for working hours to be scheduled over a reference period of a month or more, while observing an average. A reference period of 12 months (ie annualisation proper) is possible in most countries - though this requires a collective agreement in some cases. The legislation generally lays down maximum weekly and/or daily hours that may be worked during the reference period, plus the maximum average weekly hours which must be maintained over the reference period.
  • In the great majority of the countries examined, the law provides for a role for collective bargaining in the implementation of the statutory AH scheme - such arrangements can thus not be introduced purely on the basis of managerial prerogative. A collective agreement may often be required for the introduction of the statutory scheme or for the use of extended daily or weekly hours limits or reference periods as part of an AH scheme. Agreements with works councils or individual employees play a role in some countries.
  • In all countries, collective bargaining has introduced AH schemes of various kinds. While legislation in most countries encourages bargaining in this area, collective agreements on AH often predate the relevant legislation and/or contain provisions which exceed or differ from the legislative schemes. The AH schemes provided for in collective bargaining take a large number of forms, such as working time accounts and banks. Most commonly, the agreed provisions allow for hours-averaging over a reference period, which is in many cases - but by no means always - annual.
  • In many countries, the pattern for the introduction of collectively-agreed AH schemes is that the basic parameters are laid down in sectoral agreements, with their concrete implementation referred to agreement at company or workplace level. In countries where sectoral bargaining on any issues is rare, company or lower-level agreements play the main role in introducing AH.
  • The details of AH arrangements are generally laid down in collective or similar agreements at company or workplace level - tied to organisational needs and the interests of the local parties - which differ greatly in terms of their content. This makes it very difficult to categorise national models of AH, as the schemes in use may differ between and within sectors in each country.
  • There is currently only very limited statistical information available as to the level of coverage of employees by AH schemes in the countries examined. However, what data is available indicates that there are major variations between countries. AH seems most common in Denmark, France, Germany and Spain, followed by a second group made up of Belgium, Finland, Italy, Luxembourg and the UK. It exists but does not have wide coverage in Austria, Ireland, the Netherlands, Norway and Sweden, and seems virtually non-existent in Greece and Portugal.
  • In sectoral terms, AH seems relatively common in manufacturing industry and less so (if spreading in some cases) in services. There is some evidence that there are quite high levels of AH in the public sector in some countries, suggesting that the tendency for the state to encourage the social partners to implement AH schemes through legislation in many countries may be carried over in some cases to the state's role as an employer .
  • AH schemes should in theory reduce the amount of overtime worked (and paid as such). There is some evidence of this, but not from all countries.
  • The introduction of AH may result in a cut in overtime payments and thus reduce wages, especially where considerable overtime had previously been worked. However, it seems relatively common in some countries for such losses in overtime payments to be offset by increases in basic pay rates.
  • The main effect on employment level of AH schemes seems to be to promote stability and job security, with little evidence of job creation (or losses).
  • There are many reported benefits of AH schemes for employers and employees/trade unions, largely depending on the nature of the scheme and the way that it is implemented at a particular workplace. However, the basis nature of AH arguably offer more advantages, and more tangible ones, to employers than to employees, and it is usually employers that instigate the introduction of AH schemes. In order for employees to receive many of the potential benefits, certain conditions must be met and certain additional or accompanying features must be added to the AH scheme (for example, an increase in basic pay to make up for the loss of overtime premia, or a cut in overall working time). Unions are those often cautious about introducing or extending AH without a real trade-off for their members.
  • The use of AH appears to have stagnated at relatively high levels in a handful of countries and never really to have got off the ground in a few others. However, overall, it is unlikely to diminish in the near future and indeed seems sure to spread further in a substantial number of countries.

These features of annualised hours schemes may raise a number of issues of wider industrial relations interest. The fact that the implementation of AH schemes usually requires a collective agreement means that this is often an agreed and consensus-based form of flexibility. However, the focus of collective bargaining on AH is at company or workplace level, where the relative strength of the bargaining parties may be different from that at a higher (eg sectoral) level. Furthermore, the company/workplace focus of AH negotiations may contribute towards a wider decentralisation of bargaining. In those cases where AH can be based on individual agreements with employees, this might help employers bypass established collective bargaining structures.

Given the desire of employees to control their own working time and better reconcile work and family/private life, and the interest of employers in more effective work organisation methods, the use of AH can provide novel and mutually beneficial solutions in terms of the way that working time is organised. However, AH can also be used to bypass protective legislation setting daily and weekly limits on the duration of working time for all workers, including more vulnerable segments of the workforce such as young people. As such, AH schemes should be determined not solely on economic grounds but also on social ones.

As more and more companies discover an increasingly wide variety of working time policy instruments, the issue of AH seems sure to be part of the wider restructuring of work organisation in the future. The spread of AH and its prospects in each country have been greatly influenced by the development of other forms of labour market flexibility and it cannot be detached from the broader flexibility debate and policies. This context will continue (along with other matters such as pay) to have an impact on the development of AH across Europe in future. (Giannis Kouzis and Lefteris Kretsos, INE/GSEE-ADEDY)

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