I have had four conversations in the last fortnight that started almost the same way. Different industries, different-sized teams, same opening line: “I think I might have to let someone go.”
And in every one of them, what came next was not a plan. It was a spreadsheet that no longer worked, and a person who had been turning it over at two in the morning for weeks.
If that is where you are right now, I want to say two things before anything else. You are not failing. And you are not alone in this, even though it almost certainly feels that way.
What the numbers are actually telling us
This is not a feeling. It is showing up clearly in the data.
The Australian Bureau of Statistics found in June 2026 that 46% of businesses saw operating expenses rise in the previous four weeks. The main drivers were business overheads for 65%, staffing-related costs for 40%, and upcoming finance or debt commitments for 19%.
But here is the number that tells the real story. Of the businesses adjusting to cost pressure, 44% were absorbing the increases themselves. Only 15% raised prices.
That is the squeeze in one line. Costs are going up, and most owners do not believe they can pass them on without losing the customers they have left.
COSBOA’s 2026 research on regional small businesses paints the same picture more starkly. Expenses up for 87%. Profit down 73%. Revenue growth is up only 16%. And the figure I keep coming back to: only 7% believe their expenses will fall in the next twelve months.
That last one matters, because it tells you how owners are thinking. Not about recovery. About how to keep operating in conditions they no longer expect to ease.
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The crunch point Rising costs are the headline. The real crunch point is that businesses can no longer absorb those costs, but many cannot raise prices without losing customers. When that gap closes on you, wages look like the only lever you actually control. |
Why wages become the first lever
I want to be fair about this, because the instinct is not a greedy one.
Your rent is fixed. Your insurance went up and you had no say in it. Your suppliers set their prices. Your power bill is what it is. Look down the list of costs in your business and wages are often the only line where you feel like you have any choice at all.
So that is where the eye goes. Reduce someone’s hours. Do not replace the person who left. Move a couple of permanents onto casual. Restructure the roles. Make a position redundant.
Every one of those is a legitimate business decision that Australian employers make lawfully every day. None of them is off limits.
But every one of them also sits on top of an employment contract, a modern award, and a set of obligations that do not soften because your cash flow did.
The one sentence to hold onto
If you take nothing else from this article, take this.
Cash flow pressure explains why your business needs to change. It does not remove your obligations, and it does not make a change legally available that otherwise would not be.
The Fair Work Commission will accept that your business was under genuine financial pressure. I have seen it accepted many times. What the Commission will still ask is whether you read the contract, whether you followed the award, whether you consulted where you were required to, and whether the decision you made was one you were actually entitled to make.
Those questions get asked afterwards. Which is exactly why they are worth asking now, while you still have every option open.
The order to work through it
When the pressure is on, the temptation is to decide first and check later. Reverse that, and most of the risk disappears.
1. Read the contract
Not from memory. Actually open it. What does it say about hours? Is there a guaranteed minimum, or a stated ordinary pattern? Is there a clause allowing you to vary duties or location? What notice applies? Is there a redundancy clause that gives more than the National Employment Standards?
A surprising number of contracts promise more than the owner remembers promising.
2. Check the award
Work out which modern award covers the role, and which classification the person sits in. Then read the clauses on ordinary hours, part-time arrangements, rosters, consultation and redundancy.
Part-time employees in particular usually have agreed hours recorded in writing under the award, and those cannot simply be changed because the roster needs to shrink.
3. Work out what is actually available
Sort the options into three piles. Things you can do on your own. Things you can do with the employee’s written agreement. Things you cannot do at all in this situation.
This step is where most of the value is, and it is the step almost everyone skips.
4. Consult where you are required to
Nearly every modern award contains a consultation clause covering major workplace change and changes to regular rosters or ordinary hours. It is a binding obligation, not a courtesy.
Consultation means telling people what is proposed, explaining the likely effect, genuinely listening, and considering what they say before you decide. It does not mean you need their permission, and it does not mean you have to change your mind. It means the decision cannot already be made when the conversation starts.
5. Write down the reasoning
Not a formal report. A dated note explaining the financial position, the options you considered, why you ruled some out, and what you decided.
If this is ever questioned, that note is the difference between a business that made a considered decision and a business that made a panicked one. And your memory in eighteen months will not do the job.
6. Communicate properly
In writing, clearly, and to the person before it reaches anyone else. People forgive hard news delivered honestly. They do not forgive finding out sideways.
The levers, ranked by risk
Here is roughly how I would order the options, from the ones that carry the least legal exposure to the ones that carry the most.
Start with the non-wage costs
Before touching anyone’s employment, work through subscriptions, suppliers, insurance, energy plans, equipment finance and stock levels. COSBOA found 28% of regional businesses had switched energy retailers and 21% had done efficiency upgrades. It feels too small to bother with when the gap is large. It rarely is. And unlike a workforce change, none of it carries a claim.
Overtime and additional hours
For most small businesses, the single fastest saving with the lowest legal risk sits here. Overtime and penalty hours are usually offered rather than guaranteed, and tightening approval so extra hours need a yes before they are worked can move the number meaningfully within a fortnight. Check the award first, because some contain minimum engagement and rostering rules that constrain this.
A hiring freeze and natural attrition
Not replacing someone who resigns is the least painful reduction there is. It is slow, and it is not always available when you need the saving now, but it costs you nothing in process or goodwill.
Leave management
Large accrued leave balances are a real liability sitting on your books. Awards and the National Employment Standards contain provisions for directing an employee to take excessive accrued leave, and in some circumstances for agreeing to cash out. Both are tightly conditioned, so read the clause carefully. Done properly, this reduces a future liability without reducing anyone’s income.
Agreed changes to hours or arrangements
Some employees will genuinely prefer four days to redundancy, and will say so if you ask honestly. A variation agreed in writing, freely, with the employee understanding what they are agreeing to, is a legitimate option. The word doing the work there is agreed. A change imposed unilaterally is a different thing entirely, and it is where a great many expensive mistakes begin. That is worth an article of its own, and it is the next one in this series.
Restructuring roles
Genuinely reorganising how the work gets done, rather than simply removing a person, can work. But it engages consultation obligations, and if the “new” role is substantially the old role with a smaller price tag, it will be looked at closely.
Redundancy
Last, because it is the most exposed and the least reversible. Redundancy is lawful and sometimes genuinely necessary. It also has to be genuine, consulted on, and preceded by real consideration of redeployment. Since the High Court’s decision in Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29, that consideration now extends to whether work currently done by contractors could reasonably have been brought back in-house.
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Worth knowing If you employ fewer than 15 people, you are generally not required to pay redundancy pay under the National Employment Standards. That does not exempt you from consultation, from notice, or from the requirement that the redundancy be genuine. Those obligations apply regardless of your size. |
What makes a decision defensible later
After sixteen years of this, the pattern is remarkably consistent. The businesses that come through workforce changes without a claim are almost never the ones with the best lawyers. They are the ones that did four ordinary things.
- They checked what was available before deciding, not after.
- They consulted genuinely, early enough that the input could still change something.
- They wrote down why, at the time.
- They treated the person decently on the way through, even when the news was bad.
None of that requires money. All of it requires slowing down by about a week, which is the hardest thing in the world to do when the bank balance is telling you to move now.
And one more thing, about you
COSBOA found that 77% of small business owners had experienced stress or anxiety because of their business in the past year. Two thirds had lost sleep or felt burnt out. Only 32% felt they had a decent support network. I read those numbers and I thought about every one of those two in the morning conversations. Decisions about people are the heaviest ones you make, and most owners make them completely alone, at the exact moment they have the least capacity to think clearly. That is not a character flaw. It is just what this is. So if you are working through this, please talk to someone before you act. Your accountant about the numbers. Someone who knows employment obligations about what is actually available to you. Even just another owner who has been here. A problem shared really is a problem halved. And a decision made with a bit of company is almost always a better decision.
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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.
