Getting paid more to work less is leaving many Aussies worse off

Earning more money to work fewer hours may sound like the ideal outcome, but experts warn this situation is leaving many Aussie employees in a vulnerable position.

Employers are cutting work hours to increase wages, in a move that experts warn is leaving most Australians worse off.

Exclusive research into small to medium-sized businesses – which account for almost 98 per cent of all business, making them the largest employer in Australia – reveals that while hourly pay rates are increasing, the number of hours worked by staff has slumped.

Although getting paid more to work less, most workers are seeing a reduction in earnings, says Eddie Kowalski, senior insights manager at payroll platform Employment Hero, which conducted the research.

“Is (the increase in pay rates) enough (to compensate for reduced work hours)? I don’t think so,” Kowalski says.

“We don’t see (wage increases amid reduced work hours) as a good thing.”

Fay Calderone, employment lawyer.

DOUBLE-EDGED SWORD

The research shows young workers have recorded the largest drop in hours, down 13.4 per cent for the December quarter, while their pay increased by 3.9 per cent.

The over 65s were the only worker group to enjoy an increase in hours (up 1 per cent) yet they also received one of the lowest pay rises (0.2 per cent).

Kowalski believes businesses have tried to do the right thing in awarding higher rates of pay. But their own increased costs have forced them to reduce staff hours in a bid to claw back overheads.

“Employees are asking for more pay and businesses are doing what they can to help,” he says.

“But SMEs can only do so much to help their workers through this (cost-of-living) crisis … and the wage adjustments are a double-edged sword.

“The reduced margins that increased wages create risk the viability of Australia’s SME sector,

the engine room of innovation and economic growth.”

AVOIDING LAY-OFFS

While full-time employees are protected from cuts to work hours, they are at increased risk of redundancy, employment lawyer Fay Calderone says. This potentially frees up wage budgets for companies to pay more to remaining staff.

Casual workers are the most likely to see their employment cut, she says, given part-timers can only have their hours reduced by mutual consent.

In some cases, Calderone, author of Broken to Safe, concedes workers will begrudgingly accept less hours to stave off job losses.

“It’s like a little bit of pain for everyone (through reduced work hours) can avoid a lot of pain for a few,” she says.

“If employees don’t agree to (less hours), then employers might need to take other measures, including complete elimination of roles.”

FILLING IN THE FREE TIME

Calderone says workers struggling to pay bills due to reduced hours could seek a second job to make up the lost time, so long as it is does not jeopardise their main employment.

Kowalski agrees, urging workers to use the increased pay rates to their advantage.

“If you’re in a position where you are a casual or part-time employee and you’re able to pick up additional hours for an additional employer then that’s a pathway you could take,” he says.

“Diversification of income streams, and the concept of working for multiple employers, could become a more normal state of being.”

Former Melbourne restaurant worker Reed Lewis.

`LEFT MY WHOLE LIFE BEHIND’

Former Melbourne restaurant worker Reed Lewis, 25, says he was “making an OK amount of money” until cuts to his hours made it impossible to pay the bills, even with a minor pay rise.

He took on a second job at a local bar but his financial struggles continued, forcing Lewis to take drastic action.

“Fast forward a few months, my rent went up and so did my bills and I was suddenly left facing homelessness,” he says.

“At this point, my only choice was to pack my bags and move back in with my parents in Western Australia – leaving my whole life behind.”

Lewis says more help should be available for those who can’t find enough work to meet their basic financial needs.

“For young people especially, there just isn’t enough support for job seekers who need full-time positions, often on short notice,” he says. “And there definitely isn’t enough support for people who are facing underemployment and have had their hours slashed.”

GETTING PAID MORE TO WORK LESS

Change to median hours worked

Under 18s -13.4%

18-24 year olds -13.2%

25-64 year olds -3.2%

65+ year olds 1.0%

Increase to hourly pay rates

Under 18s 3.9%

18-24 year olds 0.8%

25-64 year olds 0.1%

65+ year olds 0.2%

Source: Employment Hero