Short-time working

Short-time working refers to a situation where employees work reduced hours or days due to a temporary decrease in demand or other business challenges.
Updated: Jun 7, 2024

3 key takeaways

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Short-time working is a strategy used by companies to reduce labor costs without resorting to layoffs. It helps businesses retain their workforce during temporary downturns.

  • Short-time working involves employees working fewer hours or days than usual due to reduced demand or economic challenges.
  • This approach helps companies manage costs while retaining their workforce, which can be ramped up when demand recovers.
  • Short-time working arrangements are often supported by government schemes or regulations to protect employees’ income during these periods.

What is short-time working?

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Short-time working is a labor arrangement where employees temporarily work fewer hours or days than their usual schedule. This practice is typically adopted during periods of low demand, economic downturns, or other operational challenges that affect a company’s ability to maintain full-time work schedules.

Reasons for short-time working

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Companies may implement short-time working for various reasons, including:

  • Economic downturns: During recessions or economic slowdowns, companies may face reduced demand for their products or services, leading to the need for cost-saving measures.
  • Seasonal fluctuations: Industries with seasonal demand, such as tourism or agriculture, may use short-time working during off-peak periods.
  • Supply chain disruptions: Interruptions in the supply chain, such as delays in receiving raw materials, can lead to reduced production and the need for short-time working.
  • Technological changes: Implementing new technologies or equipment might temporarily reduce the need for labor during the transition period.

Benefits of short-time working

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Short-time working offers several benefits for both employers and employees:

  • Cost management: Reducing hours helps companies lower labor costs without resorting to layoffs, preserving financial stability.
  • Workforce retention: By keeping employees on reduced hours, companies can retain their skilled workforce and quickly ramp up operations when demand recovers.
  • Employee morale: Employees may prefer reduced hours over losing their jobs entirely, maintaining morale and loyalty to the company.
  • Government support: In many countries, government schemes provide financial support to employees on short-time working, helping to maintain their income levels.

Example of short-time working

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A manufacturing company experiences a significant drop in orders due to an economic downturn. Instead of laying off workers, the company reduces the working hours of its employees from 40 hours a week to 20 hours. During this period, the employees receive partial wage compensation through a government-supported short-time working scheme. When the economy improves and orders increase, the company restores full-time hours, retaining its experienced workforce and resuming normal operations quickly.

Challenges and considerations

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While short-time working can be beneficial, it also presents challenges:

  • Income reduction: Employees face reduced income, which can affect their financial stability, even with government support.
  • Administrative burden: Implementing and managing short-time working arrangements can involve significant administrative effort for employers.
  • Long-term viability: Prolonged periods of short-time working may not be sustainable for businesses or employees, potentially leading to eventual layoffs if conditions do not improve.

Government schemes and regulations

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Many countries have government schemes to support short-time working arrangements, providing financial assistance to employees and incentives to employers. These schemes typically involve:

  • Wage subsidies: Partial compensation for lost wages to help employees maintain their income levels.
  • Regulatory support: Legal frameworks that facilitate the implementation of short-time working, ensuring fair treatment of employees.

Short-time working is a valuable tool for managing economic challenges, allowing companies to reduce labor costs while retaining their workforce. By understanding and effectively implementing this strategy, businesses can navigate temporary downturns more smoothly and be better prepared for recovery.

For further exploration, one might study specific government schemes supporting short-time working, industry-specific applications, and long-term impacts on both employers and employees.

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AI Financial Assistant
Arti is a specialized AI Financial Assistant at Invezz, created to support the editorial team. He leverages both AI and the knowledge base, understands over 100,000... read more.