I want to shorten the working week. What are the legalities?

Hi Aunty B, 

I read that some companies are being encouraged to consider reducing the working week to four days (80%) in lieu of firing 20% of full-time staff.

Do you (or SmartCompany’s IR specialists) know what the workplace legalities are? I’m pondering whether normal full-time entitlements (like sick leave, paid holiday, maternity leave etc) are proportionally reduced by 20% annually too?

Or do these remain as minimum workforce entitlements? Or we should recalculate entitlements on a 15-month calendar year (12 x 1.25 – the inverse of 80%)? 

Puzzled,
Hobart

Hi Puzzled,

It’s tough planning for the year ahead and trying to keep jobs! We had a similar question recently regarding reducing an employee’s salary.

As Peter Vitale, our legal expert says, changing to a four day week is a change to the employee’s contract of employment, which requires their consent (unless they are, for example, genuine casual employees).

If you are planning this course you need to speak with your employees and ensure that any changes are documented.

If employment changes from full time to part time, it would normally follow that leave entitlements are calculated on a pro rata basis also.  Leave entitlements would be calculated according to the number of hours worked per week.

A change of hours would mean, in simplistic terms, that annual, sick and parental leave entitlements would accrue from the date of the change based on the lower number of hours worked.

Leave accrued before the change would remain intact.

As an example, technically the Workplace Relations Act requires annual leave to be accrued for each completed four weeks of service at the rate of one-thirteenth of the average number of normal hours worked by an employee in that particular four week period (in English, four weeks each year). So no need for the complex maths.

Calculation and accrual of long service leave will vary from state to state.

As a goodwill gesture and an incentive to get people to accept this change, you might consider preserving all entitlements up to the date of the change, and perhaps offering to continue to accrue entitlements on the full time basis.

Good luck!

Your Aunty B.

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