How to cut your wage bill (before you cut your headcount)

It may even find favour with some staff. Employees secretly harbouring a desire to spend more time with children, elderly parents or at the cinema could jump at the chance.

Simon Davies, director of outplacement consultancy Sliding Doors, says there are often workers who would like to work four days a week but have been reluctant to suggest it themselves because they were afraid they would appear less committed.

He says the key to successfully introducing a four-day week is to clearly communicate the reasons for it to the employees and convince them that it is a strategy that it will save their job, and their colleagues’ jobs. He says, done properly, it can create a sense of camaraderie among staff and a “we’re all in this together” culture.

On the other hand, employment lawyer Andrew Douglas, principal of Douglas Workplace & Litigation Lawyers, believes that reducing hours to avoid redundancies can backfire.

He says it results in employees focusing on hours of work instead of productivity. “It means you are paying your best staff less and expecting less from them. You will pay your bad staff less and get less from them, and create a culture around ‘when’ you work, not on how you contribute,” he says.

He advises his clients to do whatever they can to keep their best performing staff, as cutting everybody’s hours can upset the high performers. In sales for instance, he says, never reduce the hours of your best performers because they will take it as criticism.

To keep your best performers happy and on your payroll, not your competitors’, he says redundancies targeted at poor performers are a better option.

Legalities

• Employees must agree to any reduction in hours, whether temporary or permanent. Justitia’s Rey says that if an employee didn’t agree, they could argue that you have in effect terminated their contract and you may find yourself paying out a significant redundancy or they could make an unfair dismissal claim. After 1 July, all businesses with more than 15 full time equivalent employees will be subject to unfair dismissal claims.
• The change in working hours should be documented and proof of the employee’s consent needs to be on file in case there is a dispute later, says Rey. She suggests a letter setting out the change signed by both the employer and employee.
• Also, if you target your approach to a particular group of workers in the business sharing the same characteristic, such as women with children, you could find yourself accused of discrimination and facing an unlawful termination claim.

Reducing salaries or bonuses

In April, the Commonwealth Bank of Australia announced its chief executive Ralph Norris and other senior managers and directors took cuts to their base salaries for next year. The measure is probably aimed as much at improving public relations following community ire at bankers’ hefty salaries and bonuses as it is aimed at cutting costs to save jobs. But cutting salaries has the obvious benefit of cutting wage costs.

And Chandler McLeod’s Reynolds says it is a more palatable option now than it was 12 months ago, thanks to falling home loan interest rates and petrol prices.