To what extent can employers implement the following cost-reduction strategies as a result of COVID, and what are the primary limitations on each?
- Salary reductions.
- Facility closure.
Many rights in Australia are governed by legislation, either State (for example, long service leave legislation) or Federal (the Fair Work Act for example sets many minimum standards) and by instruments made under that legislation (registered agreements or industrial awards, for example, can both set minimum standards). So the ability to direct, for example, an employee to take leave will be restricted by that legislation.
Salary reductions will be partly governed by the contract of employment (an employer cannot unilaterally change a contract of employment) and so normally consent will be required. Even then, an agreement to reduce wages or conditions below the statutory minimum will be ineffective.
Redundancy is covered by legislation or instruments made by legislation. Condition attach: for example, there are consultation provisions.
Closing facilities will be governed by redundancy requirements and notice must be given to social security agencies.
Given that this advice is dependent on the individual circumstances of the employer, we recommend that employers seek personalised legal advice on matters related to cost reduction facilities.