This is the question I get asked more than any other when things get tight. Usually on the phone, usually late in the day, usually phrased exactly like this: “Can I just drop her back to three days?”
The honest answer is: sometimes yes, sometimes only with their agreement, and sometimes no.
Which is not the answer anyone wants when they are trying to make the month work. But it is worth knowing which of the three you are in before you make the call, because this particular decision goes wrong more often than almost any other, and it goes wrong expensively.
Why this one catches so many good employers
Reducing hours feels like the kind, moderate option. You are not sacking anyone. You are keeping the person on, keeping them connected, keeping the door open for when things pick up. Compared with redundancy it feels gentle.
And because it feels gentle, it often gets done informally. A conversation in the car park. A roster that quietly gets shorter. A text on a Sunday night.
But from a legal standpoint, cutting a permanent employee’s hours is not a softer version of redundancy. It is a change to a fundamental term of their employment contract, and it is treated seriously precisely because it changes what someone takes home.
Where your ability to change hours actually comes from
There are three layers sitting underneath every employee’s hours, and you need all three before you can answer the question.
The employment contract
Start here, and read it properly rather than from memory. Does it specify hours? Does it say “38 hours per week” or “a minimum of 20 hours per week”? Is there a stated ordinary pattern of work? Is there a clause allowing you to vary hours, and if so, on what terms?
If the contract promises hours, those hours are a term of the agreement. You cannot unilaterally take them away any more than an employee can unilaterally decide to work fewer of them.
The modern award
Next, the award. This is where people get caught most often, particularly with part-time employees.
Most modern awards require that a part-time employee’s hours be agreed in writing at the start of employment, including the days, the start and finish times, and the number of hours. Many then require that any change to that agreement also be in writing, and agreed.
So if your award says the part-time agreement can only be varied by written agreement, then a unilateral reduction is not available to you even if the contract is silent. The award sits over the top.
The Fair Work Act
Underneath everything sits the Act, with the National Employment Standards, the general protections provisions, and the unfair dismissal regime. This is the layer that determines what happens when a change goes wrong.
The answer, by employment type
Full-time and part-time employees
Generally, you cannot reduce their hours without agreement.
If you do it anyway, two things can follow. The reduction in pay can be an underpayment, recoverable as a debt. And a significant unilateral change to a fundamental term can amount to repudiation of the contract, which can allow the employee to treat themselves as dismissed and bring a claim, even though you never sacked anybody.
That is the scenario that surprises owners most. You thought you were being generous by keeping someone on. They resigned three weeks later and lodged a claim saying you forced them out.
Casual employees
Here you have far more room, because a casual is engaged without a firm advance commitment to continuing work. Offering fewer shifts is generally within the nature of the arrangement.
But two cautions.
First, watch the why. If a casual’s shifts drop away right after they queried their pay, raised a safety concern, made a complaint, or asked about converting to permanent, that timing is going to be examined. Adverse action does not require a dismissal and it does not require permanent employment. Cutting shifts absolutely counts.
Second, watch whether they are actually still a casual. Since 26 August 2024 the test looks at the real substance, practical reality and true nature of the relationship, not just what the contract says. Someone who has worked the same roster for two years may no longer be casual in substance, whatever the paperwork calls them.
What about stand down?
Section 524 of the Fair Work Act lets you stand employees down without pay where they cannot usefully be employed because of a stoppage of work you cannot reasonably be held responsible for.
I mention it because people reach for it, and it almost never applies. A downturn in trade is not a stoppage of work. Fewer customers is not a stoppage of work. Being unable to afford the wages is definitely not a stoppage of work.
Stand down is built for genuine stoppages, things like a flood, a machinery breakdown or a failure in essential supply. Using it for ordinary trading difficulty exposes you to a claim for all the wages you did not pay.
The four traps
1. The quiet roster fade
This is the most common of all, and the one that feels least like a decision. You do not have the conversation. You just roster the person on for fewer shifts, and fewer again the week after, hoping it resolves itself.
It never resolves itself. What it does is create a documented pattern of reducing someone’s income without agreement, with no explanation on file, and it removes your ability to later say the change was discussed and agreed. Have the conversation. It is uncomfortable for twenty minutes and it protects you for years.
2. The verbal agreement
They said yes in the kitchen on a Tuesday. Everyone was relieved. Nobody wrote it down.
Six months on, the recollection has shifted. Was it agreed permanently or just for a few weeks? Was it four days or four days until Christmas? You will not win that argument without a document, and you should not have to have it.
A short written variation takes ten minutes. The new hours, the date they start, whether it is permanent or for a set period, and both signatures.
3. The wrong reason
Even where you are entitled to reduce hours, the reason still matters. Reducing hours because of a downturn is a business decision. Reducing hours because someone complained, took personal leave, raised a safety issue, is pregnant, or exercised a workplace right is adverse action.
And remember the reverse onus. Under section 361, once an employee alleges the action was taken for a prohibited reason, it is presumed to be so unless you prove otherwise. You will be proving your reason with your records, which is exactly why the dated note explaining the financial position matters so much.
4. The part-time assumption
Plenty of owners assume part-time means flexible. Under most awards it means the opposite. Part-time hours are usually fixed by written agreement and can only be changed the same way.
Casual means flexible. Part-time means agreed. They are not the same thing, and treating them as though they are is a costly assumption.
How to do it properly
If after all of that a reduction is genuinely what your business needs, here is the shape of doing it well.
- Read the contract and the award first. Work out whether you need agreement or not.
- If an award consultation clause applies, follow it. Give people the information, invite their views, and genuinely consider what they say before deciding.
- Have the conversation in person. Explain the financial position honestly. People can handle the truth far better than they handle being managed.
- Offer the alternatives you can live with. A temporary reduction with a review date. A shorter week rather than fewer weeks. Some people will pick an option you did not expect.
- Put the agreed change in writing and have both parties sign it.
- Keep a dated note of why the change was needed, separate from the agreement itself.
- Diarise the review date if there is one, and actually honour it.
|
A word on temporary versus permanent If you tell someone a reduction is temporary, treat it as temporary. Set a review date and come back to it, even if the answer at the review is that it needs to continue. Nothing damages trust faster than a “just for a few months” that quietly becomes forever, and nothing looks worse if the matter is ever examined. |
The part that is not about the law
There is a version of this conversation that leaves someone feeling respected, and a version that leaves them feeling disposable. Same reduction. Same numbers. Completely different outcome for your business.
The difference is almost always whether you told them the truth early, or let them work it out from the roster.
People understand that businesses go through hard periods. Most of them have their own bills and their own worries and they are not naive about what is happening in the economy. What they cannot forgive is being kept in the dark about something that affects their income, and then discovering it by accident.
Tell them. Early, honestly, and in person. It is the hardest twenty minutes of the week and it is worth every second of it.
|
Talking it through before you act If you are working through any of this right now, you do not have to do it alone. Book a free 30 minute chat and we will talk through where you actually stand: https://calendly.com/freshhrinsights/30min Or if you would rather get straight to it, these fixed price options cover the common situations: |
- Ask Paulette, a 20 minute HR power call ($149) for a single decision you need to make this week. https://freshhrinsights.com.au/ask-paulette-a-20-min-hr-power-call/
- HR Health Check ($297), a 60 minute mini audit and risk snapshot that finds the gaps before they become claims. https://freshhrinsights.com.au/hr-health-check-a-60-min-mini-audit-risk-snapshot/
- Wage & Award Sprint ($695) if you are not certain you are paying the right rate under the right classification. https://freshhrinsights.com.au/wage-award-sprint-are-you-actually-paying-the-right-rate/
Fresh HR Insights supports small businesses across the Gold Coast, Brisbane, South East Queensland and nationally with practical HR and employment relations guidance informed by an understanding of employment law.
