Deacon's latest Workplace Pulse survey found that of 220 respondents surveyed, more than half had reduced the size of their workforce in the last six months.

The survey, primarily conducted among human resources professions in February, suggested some serious changes in the employment outlook of Australian companies since August 2008, with 65 per cent found to be planning a review of their employment contracts in the next six to 12 months.

But Brett Wilson, a principal at Aitken Wilson Lawyers, noted that businesses contemplating staff cuts need to consider whether redundancies are based on reality or recession fears. He said that, already, there were plenty of employers using recession fears as an excuse for dismissing staff whom they later replace.

"Employers need to realise that, if this happens, those laid off might seek redress through the unfair dismissal laws if they feel they have been dismissed for the wrong reasons," said Wilson.

Wilson also reminded employers that dismissed staff will almost always demand payment for all legal entitlements such as holiday and sick pay. Therefore, businesses might find themselves under further financial pressure when they dealt with dismissed staff.

Deacons added that new obligations coming into effect 1 July 2009 might present further challenges to employers looking to downsize - notably, a universal redundancy standard of up to 16 weeks' pay. Meanwhile, Deacons said employers would also be required to prove they had considered redeployment for dismissed staff in related companies, and that selections for redundancy would need to meet with applicable consultation requirements.

"Employers may find these obligations more difficult to satisfy and a greater number of redundancy dismissals may be regarded as unfair," said Stuart Kollmorgen, workplace relations partner at Deacons.