Is a 40-Hour Work Week Lawful?

Many business owners still run their workplaces based on the idea that a “standard” full-time week is 40 hours. 

But is it actually lawful? 

Well, maybe. Maybe not. It depends on how it’s structured, what the employee’s contract says, and which Award or Agreement applies. The answer isn’t as straightforward as you might think. 

And if you get it wrong? You could be on the hook for underpayment claims, Award breaches, and penalties from Fair Work. 

In this article, I'll explain what you need to know. 

The legal definition of full-time hours 

Under the Fair Work Act, the maximum ordinary hours of work for a full-time employee is 38 hours per week (plus reasonable additional hours). 

That 38 hour benchmark is the legal standard for most full-time jobs in Australia. It doesn’t mean someone can’t  work more than that, it just means anything over 38 hours is no longer ordinary hours. Instead, they become reasonable additional hours or overtime, which often needs to be paid at penalty rates. 

So if you’re routinely rostering your team for 40+ hours a week, you’re operating outside the default framework, and that’s where trouble can start. 

Where employers get caught out 

A common mistake I see in small businesses is this: 

“We’ve always done 40 hours, and everyone’s fine with it.” 

That might’ve been okay when you had a tight-knit crew, no award coverage, and no complaints. But things change. And once someone lodges a claim or a Fair Work Inspector comes knocking, “that’s how we’ve always done it” doesn’t hold up. 

Especially if: 

• Your employment contract was not drafted properly 

• Your staff are covered by a Modern Award or Enterprise Agreement that caps ordinary hours at 38 

• They haven’t been paid overtime or given TOIL (time off in lieu) 

• There’s no flexibility arrangement in writing 

  
  

That’s when the risk of back-pay claims, breach of Award penalties, or general protections disputes are looming. 

So, when is a 40-hour work week okay? 

Here are a few situations where 40 hours might be fine, but only if the conditions are right: 

1. Award-Free Employees 

If the employee is award-free, salaried above the high-income threshold ($175,000 for FY2024-2025), and their contract is airtight, then 40 hours can be their agreed full-time week. But you still need to ensure any additional hours are “reasonable.” 

What’s considered reasonable?

That's always the million dollar question.

The Act considers: 

• The employee’s health and safety 

• Their personal circumstances (for example family responsibilities) 

• The nature of the job 

• Whether they’re being compensated (financially or with TOIL) 

• Whether the additional hours are in their contract 

  
  

Even then, reasonableness can be challenged.

2. Averaging Arrangements 

Some Awards allow hours to be averaged over a period (ie 76 hours per fortnight). But those arrangements usually must be agreed in writing, and mustn’t exceed the maximum ordinary hours. 

So if you’re rostering 10-hour days across 4 days, that might work, but only under an Award that allows it, with the proper agreement in place. 

3. Flat Rate Salaries 

Some employers offer a flat salary that “absorbs” overtime. That’s fine, if it’s legally structured. You can’t just say, “This salary covers all hours worked.” You need a set-off clause in the contract and Award compliance that proves the employee is better off overall (aka BOOT: Better Off Overall Test). 

If they’re doing regular overtime and you haven’t crunched the numbers to check whether the flat salary still covers all entitlements, you're on shaky ground. 

It’s not just about the number, it’s about compliance 

A 40-hour week isn’t automatically illegal, but it’s very easy to get wrong. 

The most important thing is that: 

• Ordinary hours don’t exceed 38, unless there’s a lawful basis 

• Overtime is paid correctly (or TOIL is managed per the Award) 

• Contracts align with the Award 

• There’s written evidence of any flexible or averaging arrangements 

Fail to tick those boxes, and you could be breaching employment laws. 

Real-world example: Café owner caught out 

I recently worked with a small café client who had 2 full-time staff working 40-hour weeks, paid a flat salary. On the surface, everything seemed fine to the business owner, until one of the staff members left and queried their entitlements. 

The Hospitality Award defines ordinary hours as 38 per week, and anything extra should have attracted overtime rates. Because there was no written flexibility agreement and the salary didn’t pass BOOT, the business ended up having to back-pay nearly $7,000 in underpaid wages and penalties. 

This could have been avoided with the right structure in place from the start. 

Key Takeaways for Employers 

→ “Full-time” = 38 hours, not 40 

→  Anything more needs to be reasonable and lawfully structured (on paper and in practice) 

→ Award coverage matters, always check it first 

→ Don’t assume silence = agreement. You need written arrangements 

→ Flat rate salaries or “inclusive” pay require proper offset clauses 

→ Just because it’s “always been done that way” doesn’t make it legal 

If you’re unsure whether your current hours of work are legally compliant, or you’ve been relying on a 40-hour week without really thinking about it, now’s the time to get ahead of any risk. 

Get in Touch

Need help? Contact us today - sandra@hrconsultingtas.com.au or 0408 408 225  

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