Here’s How Much A 4-Day Work Week Saves On Business Expenses
The four-day work week is an ambitious policy designed to offer employees flexible hours and a better work-life balance. Here’s how transitioning to a shorter week could also benefit a company’s bottom line.
In today’s economy, many companies are reassessing workplace traditions passed down from an older, industrial world. One of the most popular policies to revisit is the five-day work week.
Around the world, businesses are exploring the notion that employees can be equally or more productive working just four days a week. Last month, New Zealand firm Perpetual Guardian announced the results of an experiment in which employees got one extra day off per week—32 working hours instead of 40, with no change in compensation—for six weeks. The outcome was a 24% increase in “work-life balance,” with no reported change in productivity. The firm called the experiment an “unmitigated success” and is considering making the policy permanent.
Similarly encouraging results have been reported by a diverse array of organizations over the past few years. In 2008, Utah launched a program that let state employees work four 10-hour days (a policy known as “4/10”) instead of the standard 8 hours for five days. While the policy was ultimately reversed, an official audit found that 81% of employees preferred the 4/10 schedule. 1 Personal leave and compensatory time off declined from the year before, morale improved, and the state saved nearly $1 million in operating costs.
To some organizations, that last figure might speak louder than the others. The cost savings of the four-day work week have been discussed relatively little compared to the more employee-focused benefits of the policy, but they present a tantalizing combination: a policy that cuts overhead, requires less spending on benefits, and potentially, saves on salary—all while being a hit with employees.
Could it actually be a viable policy for your business? According to some experts, there’s no reason not to try it.
The impact on productivity
The first question is whether a shorter working week affects productivity. There’d certainly be no sense saving on overhead every week if a drop in revenue wiped it out. On this question, the data is mixed.
First off, let’s acknowledge that a reduced week isn’t an option for some businesses. Any industry with a direct and predictable relationship between inputs and outputs—manufacturing, retail, construction—is not going to cut hours. Shortening work would simply reduce productivity and forego revenue.
But in a lot of the service sector, the relationship between hours worked and productivity is murky. We know that employees don’t spend every minute they’re in the office adding to the bottom line; one 2016 study from the UK found that employees actually spend less than three hours on work during an eight-hour day. Employees get away with it, though, because productivity today looks very different than it did in the industrial workhouses that gave us the five-day work week.
Value in the knowledge economy is measured in client relationships and closed deals; in creative innovations; in the quality of software code. To do this work, people need to marshal cognitive energy, and to do that, they need to be refreshed. A study done by industrial researchers in 2014 found 17 minutes of break time for every 52 minutes of work to be the most productive balance—about a 1:3 ratio. If you grant that ample time off yields better performance on the clock, something like a shorter workweek starts to sound plausible.
At the same time, the available data doesn’t suggest a shorter week improves productivity, either. Most of that evidence is anecdotal at best. Treehouse CEO Ryan Carson once claimed that the four-day policy did increase productivity, for example, but his company ultimately backtracked and reinstated a five-day work week. True believers tend to cite improved employee happiness as an end unto itself, but there’s a conspicuous lack of data connecting it to more work getting done.
Of course, this doesn’t mean the four-day work week has no hard numbers to recommend it. As long as an office’s productivity doesn’t noticeably decline, a shorter week could make fiscal sense purely based on the lower cost of keeping the office open less often.
Let’s take a look at some of these potential cost savings.
Lower facilities costs
Right off the bat, shifting to a four-day week eliminates 20% of variable overhead expenses like electricity and energy consumption. According to the US Energy Information Association, the average monthly commercial electricity bill in 2016 was $655. Reducing that cost by 20% would save $131 a month, or $1,572 a year.
Annual facilities savings:
Office supplies: $4,000
Total: $15,200In addition, four-day employees use fewer office supplies. Equipment like printers and copiers depreciate slower. Information management firm LAC Group recommends $200 per year per employee as a benchmark for office supplies. For a 100 person company, spending one-fifth less saves $4,000 a year.
Fewer work days also mean less frequent janitorial services. For a business that pays $4,000 a month for nightly office cleaning, eliminating a weekday saves $9,600 a year.
Less need for fringe benefits
Savings can really add up when you start to calculate the daily perks many businesses offer their employees. In general, the more lavish the perks, the greater the impact of cutting a day out of the week.
Take commuter benefits, for example. Suppose a 100-person company provides $200 a month to help cover the cost of employee parking or public transportation. Cutting that perk by one-fifth saves $48,000 a year. The savings would be even greater if the company operates a shuttle or transportation service. Same goes for child care, whether on-site or a stipend.
On-premises food budgets can easily exceed $10,000 a month. Four fewer days in the month nets out to hundreds of fewer mouths to feed. If the company operates a service that includes employees, like a food court or cafeteria, cutting a day out of the week additionally allows the employees who work there to stay home. Small perks, meanwhile, like a daily coffee allowance or a stocked snack room, would stretch further.
In addition to saving 20% on daily workplace perks, a company switching to a four-day week could easily justify eliminating a costly benefit wholesale in exchange for the new policy. The schedule is popular enough with employees that the free lunch, or the commuter benefit, or maybe even the child care, would pale in comparison to a permanent three-day weekend.
Less inflated salaries
One hidden area of cost reduction is the salary that a four-day company doesn’t have to offer top talent.
Sure, there is the option to actually reduce employee salaries. Amazon tested this idea in 2016, when they offered a select group of employees the chance to work 30 hours a week for the same benefits and 75% of their salary. 2 But even without docking pay, a company that demonstrates extreme commitment to a favorable work-life balance can expect to pay less of a premium to attract highly sought employees than one that doesn’t. Becoming “an employer of choice” was explicitly one of Utah’s goals when it embraced the policy in 2008. Basecamp CEO Jason Fried—a huge proponent—swears that the morale boost from four day weeks is one of the most important reasons his company lands talented people.
Finally, the freedom of a four-day week is especially appealing to one very important worker demographic: new mothers. According to Perpetual Guardian CEO Andrew Barnes, when a working mother normally negotiates a day off, “she gets paid 20% less.” Instituting the policy across the board corrects for that, and rightly aligns focus. “This is about productivity,” he said. “Negotiate on productivity. Hours are irrelevant.”
The employee-free future of work
The four-day week is part of a larger surge in non-traditional employee arrangements. Regularly working from home has increased 150% since 2005, and around half of the US workforce has a job that can support it.
But telepresence is ultimately another form of presenteeism. It doesn’t address the deeper claim made by four-day zealots: that the nature of work is fundamentally changing, and the tasks we need to accomplish simply take less time. Eventually, they say, we’ll be in a position in which human labor is needed for vanishingly few roles.
However you feel about that prediction, we’re still a long way from the end of the traditional five-day work week. Even though it’s only around a century old, the Monday-Friday system has proven to be a resilient blend of labor and leisure. Until it’s conclusively shown that the marginal return on the fifth day of work is less than the cost savings of shutting down a workplace, the four-day schedule will remain the provenance of companies that prioritize pampered working conditions above all else.