40 hour work week – Is it possible?

Australia’s 38-hour work week, mandated by the National Employment Standards (NES), sets the standard for full-time employment, balancing productivity with worker well-being. The NES states that full-time employees cannot be engaged to work more than the maximum 38 hours a week. However, many businesses often want to structure their employees to work a 40-hour work week or 8 hours per day. But is this lawful, and what are the risks?

While the 38-hour work week is the standard and highly recommended for a myriad of reasons, flexibility in contracting can allow employers and employees to negotiate terms beyond the 38-hour threshold, provided certain conditions are met.

So, let’s delve into the pros and cons of a 40-hour work week, along with the legal considerations for flexible contracting options.

Pros of Flexible Contracting Beyond the 38-Hour Workweek:

1. Flexibility for Employers and Employees: Flexible contracting arrangements allow employers and employees to negotiate terms that suit their specific needs and preferences. This can include agreements for a 40-hour work week facilitated by offset clauses or all-inclusive salaries.
2. Enhanced Workforce Management: For employers with fluctuating workloads or project-based tasks, flexible contracting provides the ability to adjust working hours to meet demand without incurring overtime costs or breaching regulatory limits.
3. Simplified Pay Structure: All-inclusive salaries that encompass potential overtime hours streamline payroll processes and eliminate the need for separate calculations or payments for overtime work.
4. Employee Satisfaction and Retention: Offering flexible contracting options demonstrates employer flexibility and responsiveness to employee needs, contributing to higher job satisfaction, morale, and retention rates.

Cons of Flexible Contracting Beyond the 38-Hour Workweek:

1. Compliance Risks: While flexible contracting offers benefits, employers must ensure that their agreements comply with the relevant legislation, including the NES and any applicable industrial awards or agreements. Failure to adhere to legal requirements can result in penalties and disputes.
2. Potential for Exploitation: In some cases, flexible contracting arrangements may expose employees to the risk of exploitation, particularly if they are pressured to accept terms that are not in their best interests or if overtime pay is inadequate.
3. Complexity in Contract Negotiations: Negotiating flexible contracting terms, including offset clauses or all-inclusive salaries, can be complex and require careful consideration of the legal, financial, and operational factors by both parties.

Legal Considerations for Flexible Contracting:

1. Offset Clauses: Employers can use offset clauses in employment contracts to offset additional hours worked beyond the standard 38-hour work week against entitlements such as leave or additional benefits. However, offset clauses must comply with legal requirements and not result in employees receiving less than their minimum entitlements under the NES.
2. All-Inclusive Salaries: Employers can offer all-inclusive salaries that encompass potential overtime hours, provided the total remuneration meets or exceeds the minimum wage requirements and any applicable penalty rates for overtime work. This is where things get complicated, and employers must do a Better Off Overall Test (BOOT) annually to ensure employees are, in fact, Better Off Overall under this arrangement.
3. Fair Work Commission Approval: In some cases, flexible contracting arrangements require approval from the Fair Work Commission, particularly if they deviate significantly from standard industry practices or award provisions.
4. Employee Consultation and Transparency: Employers should engage in open communication with employees regarding flexible contracting arrangements, ensuring clarity and transparency regarding working hours, compensation, and entitlements.

The Wrap Up

Flexible contracting options beyond the 38-hour workweek offer opportunities for employers and employees to tailor working arrangements to their mutual benefit. By understanding the pros and cons of these arrangements and navigating relevant regulations and considerations, organisations can implement flexible contracting practices that promote productivity, fairness, and compliance with employment standards in Australia. Effective communication, transparency, and adherence to legal requirements are essential for fostering positive employment relationships and achieving shared goals in the evolving landscape of work.

If you need assistance to implement or check a 40-hour work week in your business, reach out, we would be happy to assist you.

Written by Emily Jaksch