Skip to content
CityAM
Main navigation
  • News
    • News
      • Latest Business News
      • Economics
      • Politics
      • Tech
      • Banking
      • FTSE 100 Live
      • Retail
      • Insurance
      • Legal
      • Property
      • Transport
      • Markets
    • From our partners
      • AON
      • Bayes Business School
      • Canada BIDs
      • Central London Alliance CIC
      • Destination City
      • Halkin
      • Olympia
      • Inside Saudi
      • Tottenham Hotspur Stadium
      • Santander X
      • YEAR SIX Dividend
    • Featured

      England, Kansas City and Taylor Swift: Why FA chose midwest as World Cup base

      Business professionals in a modern office discussing strategies around a conference table with digital charts and laptops ...

      Submit a story

      Tell us your story.

      Submit
  • Opinion
  • Sport
    • Latest Sports News
      • Sport
      • Sport Business
    • From our partners
      • The Morning Briefing: SBS x CityAM
      • Aramco Team Series
      • LIV Golf
    • Featured

      England, Kansas City and Taylor Swift: Why FA chose midwest as World Cup base

      Business professionals in a modern office discussing strategies around a conference table with digital charts and laptops ...

      Submit a story

      Tell us your story.

      Submit
  • Life&Style
    • Life&Style
      • Life&Style
      • Toast the City Awards
      • The Magazine
      • Travel
      • Culture
      • Motoring
      • Wellness
      • The RED BULLETiN
      • Do it with Shared Ownership
      • Media Speak Hub
    • Featured

      Old Pulteney releases 50-year-old whisky for 200th anniversary

      Old Pulteney 50-Year-Old single malt Scotch whisky bottle with elegant packaging on display, highlighting luxury and craft...

      Submit a story

      Tell us your story.

      Submit
  • Investec
  • Events
  • Latest Paper
Friday 06 February 2026 5:44 am  |  Updated:  Thursday 05 February 2026 3:55 pm

Who pays for flexible working?

By: Len Shackleton

Add as a preferred source on Google
Getty Images logo on a smartphone screen with blurred financial data chart in the background, illustrating stock market tr...
Firm embraces remote work. Photo by Thomas Trutschel/Photothek via Getty Images

Flexible working has enormous benefits for employees but it is not cost-free – and it’s businesses and workers who are paying the price, says Len Shackleton

It is clear that flexible working opportunities, particularly ‘working from home’ but also compressed hours, flexitime, job shares and more, can be highly valued by both individuals and companies. If not, we would have seen a sharp decrease in their use once we were allowed to return to the office post-Covid – but we haven’t. However, they are not cost-free. There are likely hidden knock-on effects and unintended consequences which may not be so welcome. A new paper for the Institute of Economic Affairs has examined those costs and who has to bear them when the government pressure es employers to offer flexible work. The answer is businesses and employees. 

Where decisions are left to employers and employees to reach agreement, these consequences can be discussed and weighed up, and a mutually beneficial arrangement arrived at. This is how a free market works. If this leads to greater flexibility, that’s dandy. But if some forms of flexibility are inappropriate to a particular organisation, legal compulsion and concomitant tribunal penalties are not the answer.

There has been an increasing mission creep of the “right to request” flexible working. Initially intended to protect economically disadvantaged workers with health issues or caring responsibilities, it now covers a broader belief that all employees should be able to request a change to their working arrangements from day one on the new job.

The government’s new Employment Rights Act strengthens this right to request, and makes it very difficult for organisations to resist such requests. Flexible working will thus become de-facto mandatory for employers to allow, the new ‘default’. But even that is unlikely to stop the creep – there is already pressure for imposing a legal duty for employers to advertise flexible working options, for public procurement to be contingent on offering flexible work, and for a “right to disconnect” which would forbid employers from contacting workers outside normal working hours.

Labour market impacts

Each of these policies need to be assessed critically, for their partisans rarely look beyond the immediate appeal of the proposals to consider wider labour market impacts.

Accommodating flexible working can be equivalent to sizeable pay increases as employees get to save on considerable commuting costs, while a switch to a 4-day week on the same salary is an increase in hourly pay. But because some types of flexibility are not going to be available to all groups of workers – home working for bus drivers, compressed hours for surgeons – compensating wage adjustments will need to occur in order for labour supply and demand to be balanced. Any frictions that prevent the market adjusting in this way will likely damage productivity and growth, and make hiring for jobs which require presence at a workplace more difficult. Moreover a “pay increase” not clearly justified by a productivity increase is always problematic.

The private sector is often more able to mitigate these problems with the use of temporary contracts or agency workers or outsourcing tasks. But the public sector rarely does so, and it is customers and taxpayers who are left on the hook

This is a particular worry in relation to the public sector, which already has a shocking productivity track record. The private sector is often more able to mitigate these problems with the use of temporary contracts or agency workers or outsourcing tasks. But the public sector rarely does so, and it is customers and taxpayers who are left on the hook.

Policymakers are often tempted to use employment mandates to pursue social objectives because this has little visible cost to the taxpayer: it is an apparently  cheap way for the government to appease voters and unions, which is particularly important as the Chancellor remains focussed on the ever-unstable fiscal headroom. But there can be  real costs that will harm the government’s bottom line if they effectively impose changes to the form of the employment contract.

We do not pretend that we can evaluate the benefits and costs of working arrangements across millions of jobs. But nor can politicians and civil servants. Such evaluations should be done by employers and employees who better understand the circumstances of each individual family, business or organisation. 

Professor Len Shackleton is editorial and research fellow at the Institute of Economic Affairs

Read more

Pacific Prime Unveiled the Global Employee Benefits Trends Report 2026

Share this article

  • Facebook
  • X
  • LinkedIn
  • WhatsApp
  • Email

Similarly tagged content:

Sections

  • Opinion

Categories

  • Opinion

People & Organisations

  • flexible work
  • working at home

Trending Articles

  • More Big Four blues as Deloitte plans to slash UK audit roles

  • Rathbones to suspend thousands of client account inflows after FCA probe deals £530m blow

  • Rolls-Royce shares surge as SMR unit bags multi-billion pound Swedish nuclear contract

  • As it happened: FTSE 100 relief rally runs out of steam as BP and Shell weigh; Oil hits three-month low

  • London Tech Week sums up everything wrong with UK tech

More from CityAM

  • Pacific Prime Unveiled the Global Employee Benefits Trends Report 2026

    Business Wire
  • Next boss slams Labour’s zero-hour contracts crackdown

    Retail
    Simon Wolfson speaking at a business conference, wearing a suit and tie, addressing economic and retail industry topics
  • Labour warned not to kill off hybrid jobs millions rely on

    Politics
    London has defied national trends as job postings in the capital rose.
  • Zero-hour crackdown could wipe out seasonal work, Labour warned

    Retail
    Labour MPs are being warned a “perfect storm” of costs facing the retail sector could see seats lost to Reform UK.
  • Building a community of thriving professionals

    Partner
    Halkin building exterior with modern architecture and glass facade reflecting the skyline on a sunny day
  • London to be hit hardest as jobs market struggles through 2026

    Economics
    London has defied national trends as job postings in the capital rose.
  • Everest Funeral Concierge Partners With WTW

    Business Wire
  • ‘Lacking motivation’ – UK employers worry about graduates’ attitude 

    Business
    GettyImages 452181854 showing a business conference with diverse professionals engaged in a panel discussion.

CityAM Canada — business, markets and opinion for Canadian readers.

Sections

  • Business
  • Markets
  • Tech
  • AI
  • Economics
  • Opinion
  • Cities

Company

  • About
  • Contact

Legal

  • Terms of Use
  • Privacy Policy
  • Cookie Policy
© 2026 CityAM Canada. All rights reserved.
Terms · Privacy · Cookies