50% more weekend for 20% less pay

Financial Autonomy - Blog
50% more weekend for 20% less pay

For many of us, our working lives have been put through a bit of a blender over the past couple of years. Teachers taking classes from their kitchen table, Team meetings whilst still in our pyjamas, exercise replacing the commute, and trying to find what works for each of us both professionally and as part of a team. It’s been an absolutely unprecedented time in how our society works and creates economic activity.

As the working world returns to normality one change I’m hearing about from several different clients is a decision to accept less pay in exchange for working four days a week. One client who made this change recently was telling me how wonderful it is to have about 6 hours in the middle of the day completely to herself. The house is quiet, nobody needs you, you just get peace. It’s had such a positive benefit to her mental health that she has now convinced her husband to make the same change.

Perhaps cutting back your working hours is something you’ve contemplated. In this week’s episode I wanted to explore that a little, dig into some numbers, as best we can in an audio piece, and consider strategies to address the longer term impacts of making this change.



When I meet with new financial autonomy clients our starting point is always a discussion on their goals and objectives. One of the most common goals that I see is an ability to cut back from full-time work. In some cases this might be to have more time with their young family, but very often it’s more around people wanting to de-stress their lives somewhat, find that elusive balance where they don’t feel that all their life revolves around work and earning money.

The challenge of course is that in most cases making such a change means taking a pay cut. Quite reasonably we tend to arrange our lives, including big decisions like how much we can afford to spend buying a house and therefore how large a mortgage we can handle, based on our current incomes. Even someone who took out a mortgage 10 years ago, and has had multiple pay rises and promotions since, nevertheless tends to suffer the inevitable lifestyle inflation, which makes digesting a reduction in pay difficult.

Interestingly though, the reduction in pay could be less than you think, due to our marginal tax system. Regular listeners will know that I generally try and avoid giving too many numbers in this podcast as the feedback I get is that it’s very hard to digest when you’re out going for a run or walk or perhaps sitting in peak hour gridlock. Numbers are always better when you can see them written down. However for this episode I’m going to have to share some numbers with you, I’ll just try and keep them as brief and clear as I possibly can.

Let’s start by looking at the example of Jenny, who is currently working full time and, with her annual bonus, earns $200,000 per year. After tax and Medicare, Jenny would have in her pocket approximately $135,000.

Let’s now assume she negotiates with her employer to cut down from five to four days per week. This is a 20% reduction in the amount of paid employment that she does and so it’s reasonable to assume that her pay drops proportionally. Her $200,000 income therefore becomes $160,000, a $40,000 drop.

Interestingly however, her after tax income becomes just under $113,000. Her take home pay therefore has reduced by only $22,000, a reduction of 16%.

This disproportionate reduction in take home pay comes about because the top marginal tax rate applies from $180,000. By bringing her income under this threshold, she avoids some of her income being taxed at the highest 45% rate.

To crunch these numbers for your own scenario search Moneysmart tax calculator and play with the numbers.

Other things to consider

Cutting back to 4 days per week will mean your superannuation contributions will reduce, which reduces your ultimate retirement benefit. Ideally get some financial modelling done to understand the impact on your particular circumstances, but if that’s not within your budget at the moment, at least recognise that to offset the impact of lower super contributions you may need to work for an extra few years.

What will happen to your expenses? As a result of cutting back to 4 days, will you spend more money on leisure activities? A drop in income matched with a rise in expenses could be a problem.

How will a move to 4 days impact your career trajectory? In my experience, most people contemplating this change have risen to a point where they’re happy to go sideways from here. But if you’re still pursuing career ascension, being out of the loop one day per week might see you miss out on opportunities. Is that something you’re okay with?

Along related lines, how will your employer deal with you cutting back to 4 days per week? You taking a 20% pay cut doesn’t work if you’re still expected to do the same amount of work as before. It will be important to ensure that within the discussion around you making this change, changes are made to your responsibilities, so your workload reduces in line with your hours.


Have you made the change to a 4 day week? If so I’d love to hear about it. Perhaps even interview you for the podcast so others can learn from your experience. Hit reply to a GainingCHOICE email and share your journey. And if you’re not receiving that email, go to www.financialautonomy.com.au/gainingchoice

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