Annualisation of hours is a term used to describe a contract which states the agreed number of guaranteed hours the employee is contracted to work through a twelve month period. Annualisation schemes are implicitly promoted both by EU Legislation on working time and by EU policies and recommendations, which – among others – allow EU Member Countries to adopt flexible working time schedules.
Therefore, such schemes have, in recent years, become very popular in a number of European countries (amongst others: Germany, Poland, UK, Finland). In fact, EU countries consider annualisation schemes as means of achieving working time flexibility, involving advantages both for employers and employees.
In a recent case that the International Labour Office Geneva (ILO) has mentioned in its report dated May 2004, the management of a film and video production group in Hamburg which employed more than 900 workers, had to reduce personnel costs because of a decline in demand for these services. After a period of 9 months of negotiations, the management and employees' representatives agreed to introduce annualized hours of work in order to avoid cuts in staff and reduced competitiveness. This approach enabled the company concerned to reduce high operating costs of weekend and overtime work. On the other hand, employees were allowed to choose a reduction in the number of hours worked, in fact they worked only 80% of full-time working hours, and they also got 50 additional days off per year.
The reported results of the annualisation scheme concerned were positive, not only did this scheme reduce operating costs, but also increased workers' motivation because of their acceptance of additional time off in lieu of extra payments.
The Maltese Perspective
The concept of banking of working hours was introduced into Maltese Law through the Overtime Regulations of 2012 numbered S.L. 452.110. Banking of hours is more formally referred to as Annualised Hours or Schemes.
According to the Regulations, employers may, on the basis of discretionary evaluations, introduce the banking of hours. This discretion exists in all industries, whether these sectors are covered by Wages Council Wage Regulation Orders or otherwise, and up to 376 hours of the normal annual working hours in each calendar may be banked. This would allow any hours worked by the employee over and above the normal weekly working hours during periods of higher work activity to be redeemed during periods of lower activity.
Regardless of the banking of hours rules, any employee's average weekly working time including overtime, shall not exceed an average of 48 hours over the applicable reference period in terms of the Organization of Working Time Regulations.
The Regulations however provide that the employee concerned may give his/her consent in writing to work in excess of a weekly average of 48 hours. The hours of work which may be banked shall be limited to those hours on any week day which attract the normal hourly rate of payment, but subject to the total of 376 hours per annum which could be banked.
Similarly, any hours which have been banked in order to be utilised during weeks of lower activity shall only be so utilised on a weekly day of work where the hours of work are paid at a normal rate and not at the overtime rate.
Part-time and whole-time employees with reduced hours
Part-time and full-time employees with reduced hours shall not be obliged to participate in a system to bank hours and shall not suffer any detriment by the employer for failing to agree to participate in such a system.
Any banked hours may not attract any remuneration above the normal daily or weekly rate, namely the basic rate which is provided for worked hours, other than overtime hours.
Therefore clauses in any applicable Wage Regulation Order or any Regulation under the Employment and Industrial Relations Act which specifies particular/higher rates of remuneration does not apply in these circumstances. Any hours worked which attracts a special rate of payment in terms of any law, regulation, order, collective agreement or individual contract are excluded from any banking system and will be paid at the normal rate – and therefore not at higher rate provided for overtime (unless the parties agree otherwise).
Before introducing a system for banking of hours to his employees, the Employer requires prior authorisation from the Department of Industrial and Employment Relations (DIER), and the DIER may impose any conditions deemed necessary with respect to the same system.
The DIER may decide to reduce the number of employees involved in such a system and/or impose a distribution of hours other than the one indicated by the employer in the banking of hours scheme.
When the employer chooses to adopt a system of banking of hours, the following (amongst other) needs to be adhered to:
- the employee involved in the banking of hours scheme has to be given written notice by the employer of the number of hours and roster for the following four weeks;
- the employer may change weekly hours of the same employee by giving one week notice;
- if the employee concerned is requested to work extra hours, these should be paid at overtime rates.
Moreover, in the event that the contract of employment is terminated before the banked hours could be redeemed:
- such outstanding banked hours are to be paid at the applicable overtime rate;
- where lesser hours than the yearly average have been worked, the employer shall not be entitled to claim a refund in respect of hours not actually worked.
Vacation Leave and Sick Leave
When calculating the number of hours to be deducted from the annual leave or sick leave entitlements which are availed of by an employee, the hours deducted (from such annual entitlement) will be based on the number of hours worked in the particular period. Meaning that more hours are deducted in the high period and less hours are deducted in the low period.
Maternity and other Leave
When an employee participating in a system for banking of hours avails of maternity leave or other paid leave, the employee shall be entitled to receive the normal wages which may be due in respect of the maternity leave or other leave.
The employee shall be considered to have worked the same number of hours scheduled to be worked in terms of the banking system.
When an employee participating in a scheme for banking hours is on unpaid leave, the employee shall be considered to have worked the same number of hours scheduled to be worked by virtue of the banking system.
Why bank your hours?
A scheme for the banking of hours provided for by the employer may be advantageous for both the employer and the employee since it instils flexibility at the work place. Flexibility is a key feature in today's working environment due to the fluctuating patterns of demand especially when dealing with those industries which are mostly affected by seasonal work, such as the tourism industry and also the iGaming industry.
One of the main advantages of the banking of hours is that the employer may exercise control over the working patterns of his employees with the ultimate aim of maintaining efficient productivity. Naturally, production efficiency also results in the reduction of labour costs and job security is also safeguarded. Notably, an organisation which implements these types of systems is also increasing its competitive edge in today's highly active economic market.
Nonetheless, employees might not agree with the above-mentioned advantages, primarily due to the fact that the opportunities for overtime might be negatively affected. Furthermore, when hours are banked, more often than not the employer would request the employee to work extra hours at short notice which might seem unsettling for employees since this would affect their family time and free time.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.