Will Fair Workweek Laws Drive Automation?

The Fair Workweek movement is gaining momentum across the country as advocates press – and workers demand – predictability in their weekly work hours. San Francisco, New York and Seattle are among the major American cities to pass predictive scheduling legislation, and the first statewide law will go into effect in Oregon in 2018. These laws are designed to address concerns of employees at the lower rungs of the pay ladder from last-minute shift changes that can contribute to financial instability and make it difficult to arrange for child care or schedule activities like school and additional work. And they primarily target the service industry — retail, food service and hospitality organizations.

 

This poses a challenge to employers in the service industry, which is uniquely sensitive to last-minute fluctuations in demand that can affect profitability. A fully staffed dinner shift that is slower than anticipated means unnecessary labor costs, for instance, while understaffing a busy shift can negatively affect customer satisfaction and total revenue.  Ultimately, the perceived need by the operators to flex staffing at the last minute has a direct impact on the restaurant’s or service business’s bottom line.

The advanced technology in today’s environment can help, providing organizations with the ability to better forecast their volumes and therefore staffing needs – a benefit to both the employer and employee. But technology also has the potential, especially if hourly labor flexibility is costly, to lead more organizations to automate certain functions, driving productivity at the expense of jobs.

 

A restaurant that finds itself unable to predict its business effectively enough might transition from a full wait staff to a self-ordering tabletop system with a few food runners. In fast and fast-casual environments, cashiers could be replaced by kiosks. More hotels might adopt mobile check-in and check-out. A few major hotel brands already have introduced concierge and room service robots into the mix. Mobile check-in is only months away.

 

In fact, a McKinsey & Company report (July 2016), predicts that by 2031, almost half of all hotel and restaurant jobs could be replaced by automation. And Fortune (May 21, 2017) reports that the same could happen in the retail industry in just a decade. Amazon’s grocery store concept, Go Amazon, aims to eliminate cashiers entirely.

 

As more cities pass Fair Workweek legislation, it might be time to revisit other legal and contractual mandates, such as overtime rules or minimum shift requirements, to balance an organization’s need to be profitable with the employee’s right to a predictable schedule. In certain European jurisdictions, an employee can offset additional hours worked one month with time off the following month, thereby reducing the employer’s requirement to pay overtime. This accommodation works well for both parties, and while it makes particular sense in Europe (as many staff positions there are contracted on a monthly basis), there are surely some opportunities in the U.S. where more flexibility would benefit everyone.

 

With the advantage of predictability, some workers might be willing to work an elongated shift to get more pay and more flexible time off to help managers cover long volume periods. For example, a manager could schedule a worker for 10 hours on a long volume day to meet demand without bringing in two people. To do this, however, would in some cases require a change in overtime rules.

 

To accommodate shorter volume periods, shift minimums are another mandate that might be ripe for adjustment. An accommodation like this could have the shorter shift offered at a higher pay rate. Compare the cost of a four-hour shift minimum at $15 per hour to creating a three-hour shift at $16.50 per hour. The worker makes $49.50 vs $60 overall, but more per hour, and the organization saves $10.50. If the worker can pick up a three-hour shift somewhere else at $16.50, or have a split shift of another three hours, he or she earns $99 total for six hours versus $120 for eight hours.  This change can help to better meet demand and reduce unproductive costs.

 

There are some contracts that pay a premium for weekly hours under a certain amount, but there is no reason that daily hours couldn’t follow a similar model.  And technology available today could make this easy to accomplish. Particularly in the restaurant business, three-hour shifting would be more applicable to peak demand periods, at least for breakfast and lunch, and could positively impact the bottom line.

 

Open scheduling could help ensure that these non-traditional shifts are picked up by willing workers. An employer would broadcast a scheduling requirement to staff, who would then select the shifts they want based on their skill levels.

 

With all this said, a fundamental component of any dynamic demand-based business is its ability to accurately forecast how much business will need to be serviced on a particular day and time. The organizations that are being targeted by Fair Workweek initiatives are those that live in the “just in time” world. The accurate prediction of business volumes for these types of businesses is critical when trying to optimize labor use (cost and service), and that’s one of the reasons that online operations are more successful, as the computer handles the customer interaction. There will still be a need, though, for businesses that interact with patrons, and forecasting accuracy is a key to that success.

 

There’s reason to think today’s workers could be open to such changes. Flexible scheduling is, in fact, crucial to job satisfaction for millennial workers, who are now the workforce majority, in their quest for better work-life balance. In a poll of millennials conducted by The National Society of High School Scholars in 2016, flexible work hours/schedule (70 percent) ranked above benefits (60 percent), base salary (46 percent) and performance bonuses (19 percent) among factors they consider in choosing an employer.

 

Without such changes, the entire burden of predictive scheduling would be shouldered by the employer, which will incentivize organizations to automate certain processes. Avoiding that outcome will require better scheduling systems that more accurately forecast business levels, and finding a balance between what employers can afford and employees are prepared to accept.