Reducing an employee’s hours or pay is a common concern for New Zealand employers, particularly during periods of financial pressure, shifting customer demand or operational change. While these situations can create a genuine need to adjust staffing levels, any change to hours or pay must be handled carefully and lawfully. In New Zealand, these terms form part of the employment agreement, which means they cannot be altered without following a fair and transparent process.
The first step in making any change is to begin with consultation. Consultation involves notifying the employee in writing that you are proposing a change to their hours or pay, and explaining the genuine business reasons behind it. This may include reduced workflow, financial constraints, seasonal fluctuations or a change in how the business operates. The proposal should set out what the change would look like, why it is necessary, when it would take effect and whether it is intended to be temporary or permanent. Clear communication at this stage helps the employee understand the context and purpose of the proposed variation.
After the proposal is provided, the employee must be given a reasonable opportunity to ask questions, provide feedback and suggest alternatives. Good faith requires that the employer genuinely considers any views presented before making a final decision. This step is not a formality but a legal requirement and an important part of maintaining trust and fairness. Employers should make themselves available for a meeting or discussion and allow the employee time to reflect on the information before responding.
Once consultation has taken place and feedback has been considered, the employer may decide to proceed with the variation. The change must then be documented correctly. A written variation to the employment agreement should clearly describe the specific change to hours or pay, the date the change begins, whether the change is temporary or permanent, and the expected duration if it is temporary. Both the employer and employee must sign the variation for it to take effect. Clear written confirmation protects both parties and helps avoid misunderstandings later.
Even when reducing hours, it is important to consider practical factors such as how rosters will be managed, how workloads will shift and whether training or role adjustments are required. Communication throughout the process is essential, and keeping the employee updated helps maintain a constructive employment relationship.
In summary, an employer can reduce an employee’s hours or pay, but only by following a fair, legal and well-documented process. Consultation, open communication and proper documentation are critical to ensuring the change is made correctly and respectfully. If you need assistance preparing consultation letters, variation agreements or guidance on how to manage the process from start to finish, proHR can support you to ensure everything is handled safely and professionally.
