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An Annualised Hours Contract is a system whereby the period of time within which full time employees must work is defined over a whole year. In other words, it specifies the number of hours to be worked in one year.


This system originally developed in industries with a seasonal work flow, such as manufacturing, but since then many organisations from a range of industrial sectors have adopted the principles and applied them to their specific needs.


Annualised Hours Contracts are normally (but not always) associated with shift work. In an annualised hours contract a worker’s hours are calculated over a year. Once the annual hours of work have been agreed these hours are usually distributed in a schedule. Some of the hours may be held in reserve to be used when the employer and employee agree, or they may all be used within the schedule.


An annual hours system has several advantages for both employers and employees. It provides greater employee flexibility and can be used to help reduce the working week, to reduce, abolish or control overtime, to help the business cope with seasonal variations and/or peaks and troughs in demand and to maximise productivity and efficiency. Many employees will welcome the stability that an annualised hours contract brings. However, employees who have high overtime earnings may resist the introduction of annual hours.


This Annualised Hours Employment Contract template provides for a number of hours to be worked each year, however, it does not set in stone the hours and days to be worked each week. It allows for a total number of hours to be agreed between Employer and Employee, which are then spread out through the year as required so that more hours are worked at peak periods.


It is a requirement under the Employment Rights Act 1996 for Employers to provide their Employees with a written statement of their main terms and conditions of employment. This must be provided within 8 weeks starting from the commencement of Employment. This Annualised Hours Employment Contract contains all the main terms and conditions required under the Act.


This Annualised Hours Employment Contract is in accordance with the statutory minimum requirements and complies with the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011. From 6 April 2011, it is no longer possible to retire employees once they reach the age of 65 unless their retirement can be objectively justified. Thus, this Employment Contract contains a clause stating that there is no normal retirement age in operation and employees are free to retire at any time they wish.


The Annualised Hours Employment Contract is in Microsoft Word format, written in plain English and can be tailored to suit your needs.



This Annualised Hours Employment Contract contains the following clauses:


  1. Place of Work
  2. Commencement and Term of Employment
  3. Hours of Work
  4. Remuneration
  5. Holiday Entitlement and Pay
  6. Absence and Sick Pay
  7. Notice
  8. Disciplinary and Grievance Procedure
  9. Maternity and Paternity Leave
  10. Retirement
  11. Additional Policies
  12. Pension Scheme
  13. Collective Agreements
  14. Property
  15. Governing Law