Reduced Hours, Reduced Pay? Adjusting Pay for a 4-day Workweek

The four-day workweek is gaining traction as more companies are seeing benefits like increased productivity, more job applications, improved retention, and reduced carbon footprint. 

That leaves companies with a challenging question to consider: should reduced hours mean reduced pay?

It’s important to consider and communicate how a four-day workweek will affect compensation at your organization, if at all. Every company may structure a four-day workweek or approach the compensation factor differently. 

Here are some things to take into account if you’re considering adjusting pay for a 4-day workweek.

The structure of your 4-day workweek

There are many different ways to structure a four-day workweek. You may take this into account in your decision to change compensation, especially as some structures don’t include a reduction in hours worked. 

Compressed workweek

A compressed, or condensed, workweek means employees work their usual number of hours in fewer days. There are a few ways this might be organized:

1. A 4/10 schedule, in which employees work four 10-hour workdays and take three days off each week. 
2. A 9/80 schedule, in which employees work 80 hours across nine workdays, and get a four-day workweek every other week. This is also known as a 5/4/9 schedule as it typically entails working four 9-hour days and one 8-hour day one week, then four 9-hour days and one day off the following week.
3. A 3/12 schedule: Some companies offer a three-day workweek in which employees work three 12-hour shifts and take four days off each week. 

If your employees are working the same number of hours in a compressed workweek, you won’t have much justification to reduce pay.

Reduced hours

A more recent trend is to allow full-time employees to work eight or nine hours each day, four days a week.

While some employers reduce pay with reduced hours, many do not. Your decision may consider the impact a four day workweek will have on productivity, your goals, and your scheduling needs.

For example, when Iceland reduced the workweek to 35-36 hours without reducing pay, they found that productivity and service provision were maintained or improved. They also found that their team members’ wellbeing and work-life balance improved.

This could be related to the Pareto principle, which states that 80% of outcomes come from 20% of causes. When you apply this to the workweek, you could say that 80% of the impact your employees have can be accomplished in just 8 hours of work each week. Any time they put in after that produces diminishing returns, so reducing the traditional workweek by 4-8 hours may not negatively impact productivity. 

On the contrary, many employers have found that reduced hours gives their employees more time to recharge so they come to work more focused, creative, and productive. 

If your team members are able to accomplish their goals in fewer hours, it may not make sense to cut pay. And even if your team’s workload needs to be reduced a bit, consider the other benefits of reduced hours—including talent attraction and retention—and how reducing pay could counteract those.

“Summer Fridays”

Some companies offer four-day workweeks seasonally, often during the summer to allow employees to get a head start on their weekend plans. 

This can be adapted to appeal to your team members and target candidates, and meet the needs of your customers. For example, a winter sports gear manufacturer might offer “Winter Fridays” so team members can get in an extra day on the slopes. Or if your company has a busy season, you might allow four-day workweeks only outside of that timeframe.

Maintaining consistent pay throughout a seasonal four-day workweek would avoid confusion among employees and additional administrative burden for your team.

Your goals for a 4-day workweek

In addition to considering your structure for a four-day workweek, consider your goals for this transition and whether adjusting compensation would support them. For example:

• Employee retention. Four in five employees (81%) say a four-day work week would make them feel more loyal to their employer. But only 37% of employees would be willing to take a 5% pay cut or more in exchange for a four-day workweek and just 8% would take a 20% pay cut or more. Reducing pay during your transition to a four-day workweek could lead to high employee turnover, costing you more in the long run.
• Talent attraction. Most US employees (92%) want a four-day workweek and 82% believe a four-day workweek would help their company recruit talent. But compensation is the top reason candidates are looking for a new job and the top influence in accepting a new job offer. A four-day workweek paired with competitive compensation can help you stand out to candidates, but reducing pay could turn talent away.
• Save money. If you’re transitioning to a four-day workweek to save money, reducing pay might sound appealing—and there’s a small subset of employees and candidates who wouldn’t mind. But tread carefully, as this can impact retention. If you decide to go this route, give your employees plenty of notice so they can prepare. You may also implement lower salary bands only for new hires, or give employees a choice around whether they will transition this modified schedule option.

Scheduling needs and fairness

If your business needs to be open or you need people working a certain amount of time each week, introducing a four-day workweek could mean you need to hire more employees. 

For example, staffing a hospital, call center, or workplace that’s open to the public requires a specific amount of coverage. If an employee reduces their hours from 40 to 32, someone else would need to cover those other eight hours.

You can certainly still move forward with a four-day workweek, but this is a good scenario to consider reducing pay if employees agree to reduced hours. This gives your team members the benefit of a four-day workweek without increasing payroll costs.

You might also consider reducing pay in workplaces where a four-day workweek can’t be offered to everyone. For example, if you have customer-facing employees who need to be available during regular business hours. Reducing pay for employees in other roles who voluntarily reduce their hours would be a more fair approach. Alternatively, you could try staggering schedules for customer-facing roles to ensure you always have some coverage when needed.

Final thoughts on adjusting pay for a 4-day workweek

It can be difficult to predict how a four-day workweek will impact employees, customers, productivity, revenue, or other goals you have in mind. Consider running a short-term trial to learn if it’s a viable option for your business and whether it makes sense to adjust compensation. 

Communicate with your team that the results of this trial will be considered in fine-tuning your four-day workweek policy, including how compensation is set, if it proves successful. And make sure to collect feedback from your team members following the trial to learn what worked, what didn’t, and how they’d like to structure their workweek going forward.

A four-day workweek can have tremendous benefits for both your company and employees, but the only way to know for sure is to give it a try.