Flexitime balance, working-time bank and pekkaset – how they differ

A flexitime balance, a working-time bank, an overtime bank and working-time reduction days (Finnish: pekkaset) look the same day to day: hours accrue, and they are later taken as time off. The legal basis, who initiates the accrual and the maximum amounts are different, though. Flexitime and flexible working hours are forms of agreement under the Working Hours Act, the working-time bank is a system agreed separately, exchanging overtime for time off is a way of compensating work, and working-time reduction leave comes from the collective agreement. In practice the difference is settled when the hours are drawn down or the employment ends.

Five systems in one table

Flexitime hands the shape of the day to the employee

Under section 12 of the Working Hours Act, the employer and the employee may agree on flexitime so that the employee can decide, within agreed limits, where to place their daily working hours. The agreement must settle at least four things: the uninterrupted fixed working time, the daily flexitime limit and the placement of the flexitime, the placement of rest periods, and the maximum accumulation of excess and shortfall against regular working hours. All four are written into the agreement before the balance is tracked.

The flexitime that shortens or lengthens the regular daily working hours may be at most four hours. Regular weekly working hours may average at most 40 hours over a four-month monitoring period. At the end of the monitoring period the accumulated excess may be at most 60 hours and the shortfall at most 20 hours.

Note. The 60 and 20 hours are measured at the moment the monitoring period ends; they are not limits for each week. Within the period the balance may move within the flexitime limits. The same section provides a way to draw the balance down: the employer and the employee may agree that the accumulated excess is reduced by paid time off given to the employee, and at the employee’s request the employer must aim to give that time off as whole working days.

Flexitime also affects shift planning. The law speaks of the shift roster, everyday language calls the same thing the shift schedule, and under section 30 it may be issued as valid until further notice where flexitime applies. An agreement on flexitime replaces the shift roster when the principles applied to the placement of working hours appear in it. An agreement on flexitime made until further notice can be terminated so that it ends when the working-time monitoring period ends.

Flexible working hours cover the place of work too

Flexible working hours (section 13) go further than flexitime: for at least half of the working hours, the employee independently decides both when they are worked and where the work is done. The agreement must settle the days on which the employee may place working hours, the placement of the weekly rest, any fixed working time, and which working-time arrangement applies after the agreement ends. Fixed working time may not be placed between 23:00 and 06:00. The agreement must be made in writing, and regular weekly working hours may average at most 40 hours over a four-month period.

Under flexible working hours the working-time records are built from the employee’s own report. Each pay period the employee submits to the employer a list of the hours worked during regular working hours, showing the weekly working hours and the weekly rest, and the employer enters this information in the working-time records (section 32). What is measured is therefore weekly working hours and weekly rest, whereas flexitime measures excess and shortfall against the day’s target.

The working-time bank is a collective system in which every transfer is voluntary

Section 14 defines the working-time bank as a system for reconciling work and time off, in which working time, earned leave or monetary benefits converted into time off can be saved and combined. Its introduction is agreed between the employer and the shop steward or, if none has been elected, the elected representative, another representative of the employees, or the staff or a staff group together. The agreement is made in writing, and an agreement made by a representative binds the employees the representative is deemed to represent.

The agreement must settle at least which items may be transferred into the bank, the saving limits, the termination of the bank and the compensation for items held at termination, and the principles and procedures for taking the time off.

A transfer is always made with the employee’s consent, given for each occasion or for a short fixed term. The items that can be transferred are additional-work and overtime hours, hours accrued in a flexitime system up to 60 hours over a four-month monitoring period, and monetary benefits based on law or agreement once they have first been converted into time.

Three items stay outside the bank: pay for regular working hours, expense allowances and claims in the nature of compensation, and a monetary benefit once it has fallen due for payment. The saved working-time balance may grow by at most 180 hours during a calendar year, and the total balance may be at most an amount corresponding to six months’ working time.

For the taking of the time off, the law gives the employee minimum rights. The employee has the right to take at least two weeks of the time off saved in the bank per calendar year and, where more than ten weeks have been saved, at least one fifth of the balance per year. At the employee’s demand the employer must give the time off within the following six months. If the employer sets the timing of the time off, the employee has the right, on demand, to receive compensation in money instead of time off. When an item is transferred into the bank, its original terms on when the time off is given or when it falls due are replaced by the terms of the bank system.

The overtime bank is a name for exchanging overtime for time off

“Overtime bank” is an everyday word; the law speaks of giving additional-work and overtime compensation as time off. The basis is section 21, under which it may be agreed that the pay for additional or overtime work, and the increase for Sunday work, is exchanged in part or in full for corresponding time off during the employee’s regular working hours.

The length of the time off follows the compensation rates in section 20. For daily overtime, the first two hours are paid at a rate increased by 50 per cent and the following hours at a rate increased by 100 per cent, and weekly overtime at a rate increased by 50 per cent. Expressed as time off, this means that one hour of +50 per cent overtime is one and a half hours off and one hour of +100 per cent overtime is two hours off. Additional work is compensated at the pay for the agreed working hours, so it is exchanged for time off hour for hour.

The time off must be given within six months of the work being done, unless otherwise agreed. If no agreement is reached on the timing, the employer sets it, unless the employee demands that the compensation be paid in money. Alternatively the employer and the employee may agree that the time off is transferred into the section 14 working-time bank or combined with the saved leave referred to in section 27 of the Annual Holidays Act.

Pekkaset come from the collective agreement

Working-time reduction leave, or pekkaset, is not governed by the Working Hours Act. It is based on a provision in the collective agreement that shortens annual working time in the form of days off. The basis of the accrual, the yearly cap, the time within which the leave is given and the treatment of unused leave are determined by the applicable collective agreement, and they vary by sector. Read the provision for your own sector before you set the accrual rule.

The practical difference from the other balances is the initiative: reduction leave accrues from a rule in the agreement, not from the daily choices of the employee or the employer. That is why it belongs on a balance of its own. If reduction leave is mixed into flexitime, both the monitoring period in the Working Hours Act and the yearly cap in the collective agreement measure the wrong figure.

A collective agreement may derogate from the limits in the law

The figures described above are the defaults in the law. Under section 34 of the Working Hours Act, a national collective agreement may agree otherwise on the limits of flexitime, the maximum accrual and the length of the monitoring period, on the adjustment period for flexible working hours, on additional-work and overtime compensation and on giving that compensation as time off. Such an agreement may also set up an arrangement corresponding to a working-time bank, but it may not prohibit a working-time bank or flexible working hours under the law. A generally applicable agreement is followed in a non-organised company as well, so check your own sector’s agreement before you set the balance limits according to the law.

The difference between overtime and flexitime is the initiative

Additional and overtime work requires the employer’s initiative (section 16). If flexitime or flexible working hours are in use, doing additional or overtime work must in addition be expressly agreed. Overtime may be worked only with the employee’s consent, given for each occasion or for a short fixed period at a time where this is necessary for the arrangement of the work (section 17).

The same long day is therefore a different thing depending on who started it. When the employee decides to stay longer within the flexitime limits, the time accrues to the flexitime balance. When the employer asks for the work and the employee consents, the time is classified as additional or overtime work and compensated accordingly.

Where flexitime is applied, daily overtime is work exceeding eight hours in a day. Weekly overtime is work done on a day off under the shift roster that exceeds 40 hours without being daily overtime. If weekly working hours shorter than 40 hours have been agreed, additional work is work done beyond regular working hours that is not overtime. Overtime also covers work done beyond the fixed working time on the employer’s order that causes the maximum flexitime accumulation to be exceeded at the end of the monitoring period.

Example: a flexitime balance over two weeks

The employee’s regular working hours are 37 hours 30 minutes a week, or 7 hours 30 minutes a day. Flexitime is in use. The balance is zero when the period starts.

Wednesday of week 2 is the heart of the example. The day is 11 hours, but it does not increase the flexitime balance at all, because the work was done on the employer’s initiative and the overtime was expressly agreed. The day breaks into three parts: 7 hours 30 minutes of regular working hours, 30 minutes of additional work (the gap between regular working hours and eight hours) and 3 hours of daily overtime, of which the first two hours are compensated at an increase of 50 per cent and the third at 100 per cent (section 20). If the overtime is agreed to be exchanged for time off, the time off comes to 2 × 1.5 h + 1 × 2 h, that is 5 hours, plus the 30 minutes of additional work hour for hour.

At the end of the two weeks the flexitime balance is zero, even though the employee has worked one 11-hour day. The overtime hours live in their own accrual, and the 60- and 20-hour limits of the monitoring period are measured from the flexitime balance only.

Which account the hour goes to

A day’s surplus belongs to one account at a time. Decide in this order:

1. Was the work employer-initiated and was additional work or overtime agreed? Check which threshold the hour exceeds. Overtime normally requires consent for each occasion; additional work has different consent rules (sections 16–17).
2. Has the additional or overtime work been agreed to be exchanged for time off? If it has, the hour turns into time off at the increase rates in section 20 and must be given within six months unless otherwise agreed (section 21). Otherwise it is compensated in money.
3. Did the employee decide on a longer day within the flexitime limits? Then the hour accrues to the flexitime balance, whose limits are 4 hours a day and 60 hours of excess at the end of the monitoring period (section 12).
4. Are the flexitime hours transferred onward into the working-time bank? That is possible if there is a written agreement on the bank under section 14 and the employee gives their consent. At most 60 hours may be transferred from flexitime over a four-month monitoring period.
5. Is this working-time reduction leave? It accrues from a rule in the collective agreement onto a balance of its own, not from the day’s surplus.

Checklist

• The flexitime agreement has been made and contains all four points the law requires: the fixed working time, the daily flexitime limit and the placement of the flexitime, the placement of rest periods, and the maximum accumulation of excess and shortfall.
• The first and last day of the monitoring period are in the calendar, because 60 and 20 hours are measured at the moment the period ends.
• The way the accrual is drawn down has been agreed in advance: shorter working days or paid time off, and whether the time off is given as whole working days at the employee’s request.
• Where flexible working hours are used, the agreement is in writing and the employee’s per-pay-period list of hours is part of an established procedure.
• There is a written agreement on the working-time bank with the right counterparty, settling the items that may be transferred, the saving limits, the termination of the bank and the principles for taking the time off.
• The consent procedure for transfers is described: how the employee gives consent for each occasion or for a short fixed term.
• The bank’s limits are tracked: 180 hours per calendar year, a total balance corresponding to six months’ working time, and at most 60 hours from flexitime in a monitoring period.
• Items that do not qualify for the bank are excluded: pay for regular working hours, expense allowances and claims in the nature of compensation, and a monetary benefit that has fallen due.
• Exchanging overtime for time off has been agreed separately and the length of the time off is calculated at the increase rates.
• The six-month deadline for overtime time off is tracked and the procedure for setting the timing is known.
• The collective agreement’s provision on reduction leave has been read: the basis of the accrual, the yearly cap, the time within which leave is given and the treatment of unused leave.
• The initiative is visible in the records: for a long day it is clear whether it came from the employee’s choice or the employer’s order.
• The accruals are kept apart: the flexitime balance, the working-time bank, overtime time off and reduction leave as separate balances, because their limits and drawdown rules differ.
• The working-time records cover the bank: saved items and the taking of them as time off are recorded (section 32).
• Agreements generally applied at the workplace are available to the employees (section 43), and it has been agreed how the accruals are compensated if the employment ends.