
In 1930, renowned economist John Keynes wrote a famous essay titled ‘Economic Prospects for our Grandchildren’. He forecast that in the next 100 years, working hours will reduce to 15-hours in a week. Ten years to go, Indians in the cities are still slogging 53-54 hours a week at work, as per the latest NSSO survey.
Is it possible to negotiate a reduced work schedule with your employers? And what will be the financial consequences?
Check your Affordability
Spending a day less at work or putting in lesser working hours will reduce your salary, depending on the employer. Moving from a five-day work week to a four-day work week might hit your salary by 20 percent. However, thanks to marginal tax rates, take-home salary of those in the top tax-bracket will be hit by only 16 percent. Moreover, it could affect other corporate benefits like bonus, medical and transport based on the arrangement.
So, check its impact on your household finances. Take the case of a couple, earning Rs 10 lakh each year. If one of them works four-days a week, his or her increment is expected to be lesser than the usual – thanks to part-time penalty. We have assumed four percent annual increment for part-timers as against eight percent for the full-timers. The couple is assumed to save 20 percent of their combined income each year to invest in a mix of equity and debt funds that yield about 11 percent.
Under normal circumstances, the investments of the couple would have grown to Rs 8.3 lakh over a 10-year period as against Rs 7 lakh, if one of them opted for a four-day a week. In other words, the part-time decision impacts the couple to the extent of 16 percent. The financial impact would double to 32 percent, if the part-timer is the sole earning member. Over a 20-year period, the financial chasm for a single and the double-income earning household is even more - 41 percent and 20 percent respectively.
A flexible work schedule, that impacts your earnings, is worth it only if you are closer to achieving your financial goals. As long as you don’t dip into the corpus and manage to cover expenses from your current earnings, it makes sense.
