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Can you afford a four-day work week?

Is it possible to negotiate a reduced work schedule with your employers? And what will be the financial consequences?

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. 


Check the Goal Post

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. While the self-employed have greater flexibility, they also need to be more productive, so as not to lose out on business. 

Alternatives

If compressed work schedule is a financial stretch, consider alternatives like working longer hours for lesser days. Instead of the eight-hours five-day a week schedule, you can ask your employer for a 10-hour a day for four days. Depending on the industry and nature of job, you might be able to pare down your working days without losing on income. Some employers also allow people to work remotely from home for a day or two in a week. It could save on commuting time. 

Set the Boundaries

When you are opting for reduced working hours ensure the terms, about your job responsibilities and deliverables, are clear with your employer. 

Time Management

Extra day or hours gained can mean a lot to you. From spending more time with your family to giving more hours to your hobbies, it is all up to you. Manage your time well, though.

In a Nutshell

What economist Keynes forecasted might never happen in our lifetime. While shortened working schedule brings work-life balance, it also has financial consequences. Think of dropping a day at work only if the impact on your finances and goals is not significant. 

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