How To Reduce Staff Hours (2025 Updated)

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While the decision to reduce staff hours is always challenging, it may be unavoidable for your business in some situations in 2025. For further insights on managing workforce adjustments, check out our guide on reducing staff hours.

Before taking any action, it is important to consult with your staff. Decisions like these are never easy, so preserving the morale of your remaining employees is crucial. Maintaining a healthy relationship can also pave the way for re-adjusting their hours in the future. For more detailed advice on collaborative decision-making, you might also find our business partners guide useful.

Although the situation is difficult for those affected, handling the process fairly and sensitively can make all the difference.

Things To Consider Before Reducing Staff Hours

Before you adjust your staff hours, there are several factors to consider regarding employment status, Modern Awards, and leave entitlements.

Employees vs Contractors

Firstly, it is critical to determine whether your staff are employees or independent contractors. We’ve discussed the distinction between employees and contractors here; let’s briefly run through the key points.

The following factors are relevant when distinguishing between an employee and a contractor:

Control: Whether they have autonomy over how the work is carried out, as long as it is completed to a satisfactory standard.
Invoicing: Whether they are engaged for specific tasks and invoice you under their own ABN.
Tools and Equipment: Whether they provide their own tools and equipment and are not required to wear a uniform.
Insurance: Whether they maintain their own insurance policy.

Fair Work considers a variety of factors when distinguishing between contractors and employees – you can review their full factsheet here. It’s wise to seek advice if you’re uncertain, as misclassifying a staff member could lead to claims such as unfair dismissal or the recovery of denied entitlements.

Independent contractors, on the other hand, are generally not eligible for standard employment entitlements or unfair dismissal claims.

Categories Of Employees

If they are not contractors, it is important to know what type of employees you currently employ. Let’s explore the common classifications.

Permanent Employees

A permanent full-time employee typically works an average of 38 hours per week, whereas a permanent part-time employee works fewer hours.

Permanent employees generally work regular hours each week and are entitled to sick leave as well as paid annual leave.

If you terminate a permanent employee’s engagement, you are obliged to:

Provide the required notice period;
Pay out any accrued leave and other entitlements.

Casual Employees

Casual employees work irregular hours and typically do not have a firm commitment regarding their ongoing employment, as outlined in their employment agreements.

Often, casual employees are not given a set schedule, and they do not receive paid sick or annual leave.

To compensate for this, they usually receive a higher rate known as a casual loading.

In some cases, casual employees may become long-term casuals after 12 months of regular engagement. While these long-term casuals still generally do not receive paid leave, they may be eligible for parental leave or the option to request flexible working arrangements.

Regardless of whether a casual is a long-term casual or not, upon termination, they are typically not entitled to notice or leave payouts.

When Does a Casual Employee Become Permanent?

Casual employment is generally intermittent and ad hoc. However, if your casual employees receive regular, systematic hours—such as working weekly at set times and performing consistent tasks—they may be considered permanent for entitlements purposes.

For example, a notable case involving WorkPac highlighted that a truck driver, engaged on a casual basis but working a fixed rotating roster set 12 months in advance, was determined by the Full Federal Court to be a permanent employee. Consequently, he was entitled to an accrued leave payout. This case remains a relevant reminder in 2025 to carefully assess employment classifications.

The key lesson here is to ensure you fully understand the employment arrangements in your business to accurately identify your obligations.

Leave Entitlements

We’ve discussed the legal essentials regarding leave entitlements and other considerations when reducing staff hours in our other resources. It’s imperative to keep abreast of updates, as Fair Work guidelines in 2025 continue to evolve.

Modern Awards And Enterprise Agreements

If a Modern Award applies to your employee, you must adhere to its terms and conditions. Every Modern Award includes a standard consultation clause requiring you to discuss any significant changes—such as adjustments to rosters, work hours, or even termination—with your employees and their representatives. For additional guidance, refer to our Modern Award Analysis article.

This clause mandates that you inform and consult with your employee’s representative, who might be an elected employee or union delegate. If you plan to reduce your permanent employees’ regular hours or to terminate their employment, you must provide written notice and engage in thorough consultation.

Additionally, every Modern Award and enterprise agreement includes a dispute resolution mechanism to address any conflicts that may arise from these changes. Under an enterprise agreement, the Fair Work Act requires that a consultation term is included – either a negotiated one or the model term prescribed in the Act.

Alternative Arrangements And Best Practice

Beyond legal requirements, consulting with your employees is simply the fair and practical approach. Engaging them in the decision-making process may reveal mutually agreeable solutions that avoid unilateral decisions and prevent workplace tension.

In 2025, many businesses are leveraging digital rostering systems and transparent communication tools to support these discussions. This modern approach not only minimises the risk of disputes but also fosters a more engaged workforce. For further insights, delve into our resources on employment law services and best practice guidelines.

Letting Staff Go

If you find that you have no viable alternative but to let your staff go, consider options such as reducing their hours, declaring redundancy, or negotiating a stand-down arrangement. Even in times of tight cash flow, it remains essential to comply with legal obligations and ensure your employees receive their rightful entitlements.

In 2025, many businesses are adopting flexible workforce strategies to navigate economic uncertainties while planning for long-term recovery.

Before implementing any of these strategies, it is recommended to review your employment contracts and seek updated legal advice to ensure compliance with the latest Fair Work guidelines. Our employment law experts are here to assist you through these transitions.

Key Takeaways

This situation demands clear and open communication with your employees.

It’s essential to review your enterprise agreements, Modern Awards (if applicable), and employment contracts.

Above all, strive to arrive at decisions collaboratively with your employees.

Decisions such as standing down staff or directing them to take unpaid leave should not be made lightly; ensure your actions are legally sound and align with the current 2025 regulations.

If you need assistance with any of these issues, our experienced lawyers are here to help. You can reach us on 1800 730 617 or at team@sprintlaw.com.au.

Abinaja Yogarajah

Abinaja is a the legal operations lead at Sprintlaw. After completing a law degree and gaining experience in the technology industry, she has developed an interest in working in the intersection of law and tech.

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