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Varying Contract Terms and Conditions

April 26, 2022

Can I alter the terms of my employees’ contracts of employment?

All employees are entitled to a written statement of terms from day one of their employment. This should be in the form of a contract and signed by both parties. However, an employee’s current contract of employment could be a mixture of written terms, verbally agreed terms and terms implied by custom and practice.

A contract of employment is binding for both parties. This means that it is unlawful for the employer to make changes to an employee’s contract of employment without the express agreement of that employee. To impose contractual changes on an employee without the employee’s express agreement constitutes a breach of contract and a tribunal claim may be brought.

The contract of employment may include a specific clause to allow the employer to make certain changes unilaterally, such as relocation of the business to an alternative address within a stated mile radius. However, a more general flexibility clause will not be enforceable in the eyes of a tribunal judge, except for minor or non-detrimental changes.

Best practice when proposing to make any changes to the contract of employment, is to consult with the affected employees from the earliest opportunity, in order to maintain trust and transparency, thus preserving the employer/employee relationship.

Varying the contract with consent

If you wish to change an employee’s contract of employment, you should seek their express written agreement to the change and enter into a period of negotiation as appropriate.

You should first inform the employee both verbally and in writing that you are proposing (not making) a change. Always set out in detail the nature of the proposed change and why the change is deemed to be important. The employee should be invited to consider the change and then revert to you with their views.

If the employee is willing to accept the change, it can then be incorporated into the employee’s contract of employment. This can be done either by issuing a new contract of employment for the employee to sign or by issuing a contract amendment letter, which again, the employee will be asked to sign.

Favourable contractual changes, such as a salary increase or an increase in annual holiday entitlement, should not cause any problems because the employee is unlikely to object to them. However, it is always wise to record any contractual change in writing to ensure there is no dispute at a later date over what has been agreed. If a variation of contract affects one or more of the terms and conditions required by law to be covered in the employee’s written statement of terms and conditions of employment, then the employee must be given written notification of this as soon as possible and in any event not later than one month after the variation is made.

If an employee is not willing to accept the proposed change, you will have to engage in a period of negotiation with them in order to try and obtain their consent to the change. You could offer an incentive to encourage them to accept the change, such as a pay increase, a one-off bonus or an increase in annual leave entitlement. Alternatively, you might have to amend your proposal to one that is acceptable to the employee.

Varying the contract without consent

If the employee is not willing to accept the proposed change but you decide to impose it on them anyway, this would most certainly constitute a breach of contract. The employee could continue to work under protest and at the same time seek to make a claim against the company for example, for unlawful deduction of wages if you have reduced their salary without their consent. Alternatively, they may resign and then bring a case of constructive dismissal. If they have two or more years’ service, they will have the right to make such a claim.

You could terminate the existing contract by notice and offer them re-engagement based on the new contract terms. However, this could be considered as redundancy dismissal and you’ll need to follow rules around consultation periods for redundancy. You also need to offer them re-engagement immediately. Even then, an employee could potentially still bring a constructive dismissal case. This is a very risky option and you should always seek advice from an HR professional beforehand.

As previously mentioned, best practice when proposing to make any changes to the contract of employment, is to consult with the affected employees from the earliest opportunity, in order to maintain trust and transparency, thus preserving the employer/employee relationship. Ideally you will be able to negotiate new terms which are agreeable to both parties.

If you would like to make changes to your existing employees’ contacts of employment, contact The HR Team for expert advice and guidance throughout the whole process.

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