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4-day workweek bills use tax breaks to win HR support

Four-day workweek initiatives in some U.S. states faced early setbacks, but now seek to gain traction through voluntary business pilots incentivized by tax credits.

There is an emerging push by state legislatures for a four-day, 32-hour workweek. However, after efforts in New York and California failed to advance, lawmakers changed their strategies.

New York and California legislators introduced bills during the 2021-22 legislative sessions that would redefine the standard workweek from 40 to 32 hours without reducing the regular pay rate and require overtime paid above it. The bills, California's AB-2932 and New York's A10009, which applied only to companies with 500 or more employees, didn't advance.

In contrast to these initial setbacks, recent efforts in Massachusetts, with H.3849, and Pennsylvania, with HB1065, are charting a new course to establish pilot programs offering tax credits to businesses that voluntarily adopt a shorter week. In exchange, the states will ask participating companies to report their results. The outlook for these two bills is uncertain.

The proponents of the four-day workweek often cite data from 4 Day Week Global, which is a not-for-profit organization founded in 2019 and based in Auckland, New Zealand, that has been running pilot programs.

Almost all the companies retain the four-day week after the six-month [pilot] period.
Juliet SchorProfessor of sociology, Boston College; member of 4 Day Week Global academic board

"Almost all the companies retain the four-day week after the six-month [pilot] period," said Juliet Schor, a professor of sociology at Boston College who serves on the 4 Day Week Global academic board. Only 6% of companies that have adopted a four-day workweek as pilots have reverted to five days, she said. In the U.S. and Canada, the pilot had 60 participating companies totaling about 4,000 employees.

Schor hopes that government pilot programs "increase the legitimacy of the idea."

At a November Massachusetts legislative hearing on the bill, State Rep. Dylan Fernandes (D-Falmouth), a sponsor, said a four-day workweek could make businesses more competitive in recruiting workers.

"One of the biggest issues we're facing right now is attracting and retaining a workforce," he said during the hearing.

Emily Rose McRae, a Gartner analyst, said there's a "vicious cycle" if a state lacks talent. "You lose jobs because companies go elsewhere, which means you then lose more people," she said.

A different strategy

According to McRae, "incentivizing organizations to do pilots and experiment" is a good strategy.

In a recent Gartner survey, 63% of candidates rated a "four-day workweek for the same pay" as the "top" benefit for incentivizing them to take a job. Nearly all the respondents indicated that they work full time.

The 32-hour workweek efforts aren't necessarily popular. The California Chamber of Commerce put AB-2932 on its "2022 Job Killer List" because it "significantly increases labor costs." A research paper published by the National Bureau of Economic Research found that workers on four-day weeks earn less. The findings also suggested that the workers are less productive.

Kate Lister, president of research and consulting firm Global Workplace Analytics, said tax incentives might help with the adoption of state pilot programs. But ultimately, "the success or failure of such a program is all in the execution," she added.

Problems with implementing a four-day workweek could include a lack of senior management support and gaps in customer service due to insufficient coverage on favorite days off, notably Monday and Friday. Another problem might be "in-office people feeling they have to work harder to make up for those who are out," Lister said.

At the Massachusetts legislative hearing, Jon Leland, chief strategy officer and head of sustainability at New York City-based Kickstarter, a crowdfunding platform, said the company adopted a four-day workweek in April 2022.

"Our productivity went up, our ability to hit our goals went up, and employee retention isn't a problem anymore," Leland said. The company employs about 120, he noted.

Employee engagement increased, and more employees "see themselves working at our company in two years at a much higher rate than they did previously," Leland said.

Patrick Thibodeau covers HCM and ERP technologies for TechTarget Editorial. He's worked for more than two decades as an enterprise IT reporter.

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