Can I change, demote or restructure someone due to performance? 

This is one of the most common questions business owners ask when performance management stalls. Termination feels heavy. Doing nothing feels unsustainable. Changing the role feels like a compromise. For growing businesses under 100 employees, role changes can be a legitimate option but only when handled carefully. Done poorly, they often create more risk than a clean exit.

Why businesses consider role changes instead of termination

Role changes are usually considered when:

• performance issues are ongoing but not extreme
• the employee has strengths that may suit a different role
• the business is changing anyway
• leaders want to avoid termination if possible

On paper, this can feel fair and commercially sensible.

In practice, it sits in a legally sensitive space.

The difference between a role change and a demotion

Not all changes are equal.

A role change typically involves:

• different duties
• adjusted scope
• similar seniority

A demotion usually involves:

• reduced responsibility
• reduced status
• often reduced pay

The greater the impact on status or remuneration, the higher the legal risk.

Fair Work looks at substance, not labels.

When role changes are most likely to cause problems

Risk increases when changes are:

• imposed without consultation
• framed as punishment
• linked too closely to conflict
• poorly documented
• inconsistent with the contract

Even well-intended changes can be viewed as adverse action if handled clumsily.

This is where many businesses are caught off guard.

What the law cares about in these situations

Fair Work focuses on:

• whether the change was reasonable
• whether consultation occurred
• whether the employee had a genuine choice
• whether the change caused detriment

A role change that significantly disadvantages an employee may be treated as a termination, even if employment technically continues.

This is known as constructive dismissal risk.

The role of the employment contract

Contracts matter a lot here.

Contracts that support role changes usually include:

• flexibility or variation clauses
• broad but reasonable duty descriptions
• clear classification alignment

Contracts that are narrow or outdated limit options.

This is why role changes often expose contract weaknesses rather than solving performance issues.

Can pay be reduced due to performance?

Generally, no — not without agreement.

Reducing pay due to performance:

• usually requires employee consent
• must not breach award or NES minimums
• carries high risk if imposed

Unilateral pay reductions are a common trigger for claims.

If pay changes are on the table, advice should be sought early.

How restructures differ from performance-based changes

Restructures are driven by business needs, not individual performance.

A restructure may involve:

• role redesign
• redundancy
• redistribution of duties

Using a “restructure” to deal with individual underperformance is risky.

Fair Work looks closely at whether a restructure is genuine or simply performance management in disguise.

When changing the role is the wrong move

Role changes usually backfire when:

• trust between manager and employee is already broken
• the employee does not want the new role
• the business is trying to avoid a hard decision
• termination is inevitable

In these cases, role changes:

• prolong stress
• increase legal exposure
• damage team confidence

Sometimes, a clean decision is the safer decision.

Risk-based options when performance isn’t improving

There is no single correct path. There are safer and riskier ones.

Lower risk:

• clear performance management with defined expectations
• mutual agreement on role changes
• genuine restructures based on business need

Medium risk:

• informal role changes
• partial duty shifts
• ambiguous documentation

Higher risk:

• imposed demotions
• pay reductions without consent
• using restructures to manage individuals

Good HR advice helps businesses choose the least damaging option, not the most comfortable one.

Where HR support adds the most value

HR support is most valuable when:

• assessing whether a role change is lawful and sensible
• reviewing contract flexibility
• planning consultation properly
• identifying when termination is the safer option

This prevents businesses from stepping into avoidable claims while trying to do the “nice” thing.

Before changing someone’s role

Role changes feel like a softer option, but they carry hidden risk.

If you’re considering changing duties, demoting, or restructuring due to performance, that uncertainty is usually the signal to pause and get advice before acting.

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