Careful how you cut costs

12 May, 2017

Any changes to an employee’s contract can only be made either in accordance with the provisions of the contract or by agreement.

Skilful negotiating can leave both parties happy.

Potential options include freezing or delaying wage rises or reducing them.

If wage increases are guaranteed through employment contracts or enterprise agreements, employers need to look for a provision which allows a temporary or indefinite freeze and notify employees.

If there is no such provision, employers would need to seek permission to vary the worker’s contract.

If wage increases are generally offered annually but no set amount is guaranteed, or it is based on the performance of the company, employers should still take steps to manage employee wage expectations during this time such as meetings to update staff on the economy and company performance.

Reduce wages is a variation in contract requiring agreement from employees on an individual basis. Caution should be used to ensure employers do not coerce or force employees to accept a variation to contract—additionally, reductions must not result in wages falling below the minimum wage. 

For employers covered by enterprise agreements and paying above legislative minimums, applications for variations to wages need to go through a voting process with employees and an application to the Fair Work Commission.

Need further help or advice on employee wages? Contact the Employee Relations Advice Centre today or register for our Employment Law Fundamentals course today.