It's one of the most common questions we hear from clients who are struggling at work because of illness or injury: if I cut back my hours, or ask my employer to change my duties, will that hurt my chances of a total and permanent disability (TPD) or income protection claim down the track?
The honest answer is: it depends on your policy, and the changes you make can cut both ways. Reducing your hours or duties can sometimes protect your health and keep you in the workforce longer, but it can also change how your benefit is calculated, what definition applies to you, and even whether you remain covered at all. Here's what you need to know before you make any changes.
Can I reduce my work hours without impacting my income protection entitlements?
Income protection is designed to replace a percentage of your pre-disability income if illness or injury stops you working your normal hours or duties. The problem is that your benefit, and your eligibility, often depend on how your “pre-disability income” (PDI) is calculated.
Most policies calculate PDI by looking at your earnings over a period before you became unable to work at full capacity, usually the 12 months immediately beforehand. If you've already reduced your hours because of your condition before you lodge a claim, the insurer may calculate your PDI based on your reduced income, not your pre-illness full-time income. That can significantly lower the monthly benefit you're entitled to, even though the reduction in hours was caused by the very condition you're now claiming for.
Some policies have provisions that allow PDI to be based on your income before the reduction, particularly where the reduction was a direct result of the illness or injury. But this isn't automatic, and insurers don't always apply it generously. It's important to get advice before reducing your hours, so you understand how it will affect any future claim.
Can I reduce my work hours without impacting my TPD entitlements?
TPD definitions generally fall into two broad categories: “any occupation” and “own occupation”, and many modern definitions also include a specific test for people who aren't working, or who are working reduced hours, at the time they become disabled.
This matters because some TPD definitions only apply where you were working full-time (often 15, 20, or 35 hours a week, depending on the policy) in the lead-up to your disability. If you've already cut back your hours due to illness, you may fall under a different, and sometimes more restrictive, definition that applies to part-time workers or those not working at all. These alternative definitions can be harder to satisfy, and may require you to show you are unable to ever work again in any capacity, rather than simply unable to return to your previous role.
This is a genuine trap for people who reduce their hours in good faith, to manage their health, without realising it may change which TPD test applies to them.
How does changing my work duties affect my TPD and income protection claim?
Changing duties, rather than hours, raises a slightly different set of issues. For income protection, a change in duties can affect how your insurer assesses whether you have a “partial” incapacity, and how any partial benefit is calculated, since it's often based on the difference between your pre-disability income and what you're now able to earn in your modified role.
For TPD, your current duties can also affect how “own occupation” is defined. If your duties have been permanently modified by your employer, insurers sometimes argue your “occupation” is now the modified role, not your original job, making it harder to show you can't perform your own occupation.
There are also eligibility issues to watch for when group policies change, or cover increases occur, while you are already working reduced hours or duties. Group super funds frequently update their insurance arrangements, and new or increased cover is often subject to eligibility conditions, such as being “at work” and performing your normal duties on the date cover starts or increases. If you were already restricted when a policy changed, you may not be covered under the new terms, even though you kept paying premiums.
Speak to a TPD and income protection lawyer before changing your hours or duties
Because small, well-intentioned workplace adjustments can have an outsized effect on a future claim, it's worth getting advice before you agree to reduced hours or modified duties, not after. We offer a free first interview and act on a no-win, no-fee basis, so there's no cost in finding out where you stand.
Related reading
- Your guide to making a successful TPD claim: https://www.berrillwatson.com.au/supertalk-blog/2020/august/your-guide-to-making-a-successful-tpd-claim/
- What to do if your TPD, income protection or other disability insurance claim is rejected: https://www.berrillwatson.com.au/supertalk-blog/2023/april/ip-claim-rejected/
- I stopped work years ago due to illness. Can I still make a Super TPD claim?: https://www.berrillwatson.com.au/supertalk-blog/2020/september/tpd-claims-years-after-injury/
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