labour flexibility

labour flexibility

the ability of a firm to modify the employment and utilization of its labour force in the face of changing labour and product market conditions.

Several forms of labour flexibility can be identified:

1. numerical flexibility, where the level and type of employment can be varied. For instance, PART-TIME WORK and TEMPORARY WORK can enable the employer to adjust the size of the labour force;
2. functional flexibility, where the utilization of employees can be varied. Here the employer seeks to remove DEMARCATION LINES and RESTRICTIVE LABOUR PRACTICES so that, in theory at least, workers can perform a greater range of tasks. Further TRAINING may be necessary to achieve this;
3. temporal flexibility, where the hours of work can be varied so as to match them to production or operations requirements.

   Use of part-time work, COMPRESSED HOURS and ANNUAL HOURS systems may assist this;

4. financial flexibility, where levels of payment to employees can be varied in line with changes in profitability or individual performance. See PROFIT-RELATED PAY, MERIT PAY.

Firms require some degree of flexibility because of the inherent uncertainty of markets. However, it has arguably become more necessary in recent years because of intensifying competition in product markets. A firm which achieves flexibility in most or all of the dimensions above may be described as a ‘flexible firm’. Such a firm would be composed of a core workforce of functionally flexible, well-paid employees and a peripheral workforce of numerically flexible PART-TIME WORKERS and temporal workers. Labour flexibility is usually viewed as a benefit to management; however, it can also benefit employees when it enables them to fit in paid employment with other (for example, domestic) commitments. See FLEXIBLE SPECIALIZATION, FLEXITIME, TEMPORARY WORK.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson