Due to COVID-19, we are unable to keep operating as normal. As a result, we need to cut back our staffing budget. What are the legal implications if we change full-time employees to a 4-day working week? Those with annual leave could use this for the fifth day, or alternatively, 4 days a week would mean 4 days of wages. We have mentioned using annual leave to staff but they are reluctant to use it unless forced. Redundancies will be the final call, which we want to avoid.
Unless you qualify for JobKeeper payments, you cannot unilaterally vary an employee’s contracted hours. You can, however, present options to staff about changes in working hours and seek their agreement to (either permanent or temporary) reduced hours. Depending on the circumstances, this may be framed in a way where reduced hours are in the interests of avoiding other potential (more permanent) outcomes, such as redundancies.
From the outset, it is usually best to engage in consultation with staff regarding your proposed options for cost-cutting measures and the reason why this has to take place. Consultation is a requirement under modern awards; however, even if employees are not award-covered, they should still be consulted about potential changes. You should consult any applicable award regarding your consultation obligations.
As you mentioned, another potential option is to direct employees to take annual leave. You can do this if the business is going to shut down for a period (i.e. become non-operational except for a skeleton workforce). If the employees are award-covered, this may not be a feasible option, as many awards require you to give 8 weeks’ notice of the direction to take leave and you cannot reduce their leave below 6 weeks. Alternatively, you may seek to come to an agreement with employees where they voluntarily decide to take annual leave.
You may also direct an employee to take long service leave. The amount of notice required to make a direction to take long service leave varies from state to state. For example, in Victoria it is 12 weeks and in NSW it is 1 month. We recommend seeking formal legal advice regarding your specific circumstances.