The Four-Day Work Week: Pipe dream or the new normal?
As remote working, alternative working hours and all things hybrid have become the norm, the four-day work week has been increasingly gaining attention around the world. This article delves into the concept of the four-day work week, explores case studies from around the world, examines its impact on the Australian economy, and discusses the legal and industrial relations challenges associated with its implementation.
While some view the four-day work week as working a standard 8-hour day over four days instead of five, this arrangement is generally considered part-time work under Australia’s National Employment Standards (NES). So, for the purpose of this blog, the four-day work week is defined as a compressed 38-hour work week done in four days instead of five. In this model, employees work 9.5 hours a day and receive their usual full-time salary.
The whole concept around the four-day workweek, which is relatively new in Australia, has been playing out globally for some time. Let’s check out a few case studies:
- Spain: The Spanish government tried a 32-hour work week for 200 companies over three years, without reducing employee salaries, with the government subsidising the salary difference.
- Finland: In 1996, Finland introduced the Working Hours Pact, which allowed employees to adjust their working hours to suit their lifestyle.
- Sweden: A government-run retirement home conducted a trial of a six-hour workday, maintaining the same compensation as an eight-hour day.
- Iceland: From 2015 to 2019, Iceland conducted a trial where workers were paid the same amount for shorter hours, leading to renegotiations of working patterns and widespread adoption of shorter hours.
- United Kingdom: Workers at more than 60 UK companies trialed a four day work week between June and December 2022, where 92% of participating businesses opted to either continue with the four day week trial or adopt it permanently.
- Belgium: Starting in 2022, Belgians will have the right to work a four-day week, compressing the 38-hour week into four days. Employers will need to justify their refusal if an employee requests this change.
Together, these examples showed, on average, significant increases in engagement as well as an uptick in productivity. A study by the University of Reading also showed that businesses that have adopted a four-day working week have made savings of around 2% of total turnover each year. From the same study, just over half (51%) of the respondents thought that the four-day working week enabled them to save costs and of those, 62% said their staff take fewer sick days while 63% said their people produced better quality work, which is on top of the productivity gains.
But what about close to home? Well, a six-month Australasian pilot program of 26 companies found that 95% of those that participated in the study supported the model. As for employees, 96% wanted to continue the four-day week after the trial wrapped up, with two-thirds of employees reporting less burnout and 38% feeling less stressed.
Modelling that we’ve done also suggests that transitioning to a four-day work week in Australia could lead to an increase in ~$2 billion per year in GDP out to 2030. The GDP increase stems from industries reallocating resources more efficiently, resulting in reduced overheads and increased demand. This then stimulates investment, employment, and national exports as well as encourages household spending.
The good stuff:
The four-day work week looks pretty good when we consider the positive outcomes from global case studies and the potential economic benefits. But beyond that, there are other positives that come with employees reducing the number of days they work in a given week.
It turns out when you give people one less day, they end up getting more done. Research shows that overworked employees are less productive, so it’s logical that the reverse would hold true – that working less in terms of fewer days increases productivity. And this held true in Microsoft Japan’s pilot in 2019, which found a 40% increase in productivity.
That same Microsoft pilot also reported a significant decrease in operational costs, like a 23% reduction in electrical consumption. Given the strong focus on ESG and sustainability, that can only be a good thing, especially as workers are increasingly putting pressure on employers to drive more socially responsible practices. Plus, in the age of flexibility, a four-day work week is a compelling proposition for attracting top talent, and sure beats office attendance mandates.
Studies have shown that shorter workweeks result in better work-life balance, reduced stress, improved health outcomes, and increased employee engagement. This naturally leads to a drop in sick leave, which ultimately benefits productivity and the bottom line. This was the case for Perpetual Guardian in New Zealand, which tried the four-day work week and saw a 20% increase in job satisfaction and a 27% increase in work-life balance.
Workforce Participation and Inclusion
By offering more flexible working arrangements, we can increase workforce participation, especially for female workers and those with caregiving responsibilities, and foster diversity in the workplace. By attracting a more diverse workforce, organisations can benefit from a broader range of perspectives and skills.
The not-so-good stuff:
While on face value the idea of a four-day work week has a whole heap of advantages, there are a few drawbacks that need to be considered. The obvious one is that compressing five days into four results in long working days, which can result in fatigue and mental health risks. This is even more of an issue in the current economic environment and cost of living crisis, where some people may also work long hours across four days and subsequently take on a second job on top of that simply as a means to help meet rising costs at home. Some industries and roles are also less suited to four-day working week, especially those that have what we’d call high customer serviceability requirements. While the cost of implementation would be significant from both an organisational level with the shift in operations, but more so from a systems level with undertaking massive amounts of consultation and the need to update industrial and legal instruments, policies, and practices.
The legal stuff:
On that note, Australia’s industrial relations system, governed by the Fair Work Act 2009, sets standards and protects workers’ rights. The National Employment Standards (NES) prescribe a 38-hour work week for full-time employment, typically spread over five days. Modifying the NES would require legislative changes, making the likelihood of moving to four eight-hour working days as full-time work, well, at least slim in the short to medium term.
However, different industries and individual organisations already demonstrate flexibility through enterprise agreements and awards, which allow for compressed working weeks and a range of different working schedules. Think in mining and resources, for example, where people are on fly-in fly-out (FIFO) rosters on site, which could see them hypothetically work two weeks on and one week off. Or the worker who applies directly to their organisation to work their full-time hours in four days, which is already happening today.
The four-day work week has gained attention globally, and is picking up a lot of attention here in Australia. Beyond getting to enjoy a three-day weekend to help recover from the boozy brunch, there’s a sizable economic impact on top of the potential productivity and wellbeing benefits. Notwithstanding challenges around mental health, the cost of implementation, maintaining customer serviceability, and the governing legal framework.
So, will the four-day work week become a reality in Australia? Well, there are two approaches. One is top-down, which is where we change the legislation to make the transition from a five to four day week as the new standard. This is a pipe dream and won’t be happening anytime in at least the next five years, likely much longer. The other approach is a bottom up approach, where industries and organisations implement it. This is already happening and picking up speed, with the likes of Unilever and more recently Bunnings announcing a move to the new model. And as more and more organisations offer this as a key lever to attract and retain talent in the new world of work, we’ll see a groundswell drive a gradual movement to more and more companies doing the same.