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When can you vary Employment Contract Terms

Updated: Jun 2


Every time you hire a new employee, certain processes and procedures must be followed that not only ensure a smooth onboarding process but also protect both the company and the new recruit.


Having an employment contract in place that details the agreed terms of the employment is the cornerstone of the hiring process as it defines the rights, responsibilities, and obligations of both employer and employee.


But what if, further down the line, you as the employer wishes to make amends to this legally binding document? In this article, we're going to explore whether it is possible to make changes to employment contract terms and how any contract changes might be agreed.





When to consider varying the terms of an employment contract


Businesses evolve all the time, and it may be that a change within the business means you want to make an amendment to one or more employee's contractual terms.


Changes could include:

  • Amendments to the job role or job description

  • Updating pay after a pay rise

  • Changes to a working pattern or contractual hours

  • A different working location or locations

  • Requirement to travel

  • Making updates to comply with new laws or regulations

  • Altering benefits such as pension contributions, redundancy pay, or maternity pay



Is it possible to change the terms of an employment contract?


If your business has considered all other options and really wants to make a change to an employee's contract, it is possible. However, it must be done lawfully, with the express approval of the employee, otherwise the employee could take legal action for breach of contract.


Some contracts contain a flexibility or variation clause, which allows the employer to make contractual variations without the employee's agreement. When the employee signs the contract, they are agreeing to any future amendments to the employment terms.


However, we would advise that caution should be exercised if this is used. This type of clause doesn't give an employer free rein to make any changes they wish, especially at the employee's detriment. It should only be used reasonably due to the implied duty of confidence and trust. If changes are made and deemed to be 'unreasonable' then the employee may have a case for breach of contract or constructive unfair dismissal.



How employment contract changes can be agreed


So how can you go about changing an employment contract in a fair and legal way? There are a few different routes that you may wish to look into.



Consultation and agreement

Any proposed contractual changes need to be discussed with the affected employee(s). A full consultation process means the employee has all the information they need to consider the revised terms, the reasons behind the proposed changes, and the opportunity to ask questions. It's important that the employee doesn't feel pressured into accepting the new terms and they should be reassured that they won't lose their job if they don't accept them.


If your employee is part of a recognised trade union, then you must involve the union as part of the process: members will be covered by a collective agreement as well as individual contracts. It's your responsibility to make sure communication takes place clearly and regularly, either directly with non-union members or through a trade union if affected employees are members of one.


If the employee accepts the contract changes, then they should be added to their written employment contract as soon as possible.



Implication

This is a potentially sensitive – and risky – option, but it may be possible to make contract changes through implication. For example, if an employer has requested a worker to change to a different shift pattern and this has been accepted and carried out for a period of time, it can become an implied term of the contract.


Or, perhaps if a detail is omitted in the employment contract, such as place of work, then there could be an argument that the employee has agreed to work in any location, by implication.

But again, this strategy must be used reasonably and with caution. If you make an unreasonable request then legal claims may be brought against you.



Fire and re-hire

A fairly controversial – although technically legal – route is to terminate the employment of the employee, with reasonable notice, while also offering to re-hire them on new contract terms. Acas recommends that this option only be used as a 'last resort', as if the employee does not agree to accepting the new position, they may have a case for unfair dismissal against you.


Even if employees continue working under changes you’ve introduced, they may still bring a claim against you. Employment Tribunals recognise that many individuals may feel they have no real choice but to accept the changes in order to avoid the financial risk of losing their income.




FAQs

How much notice should be given to vary the terms of a contract?

You need to give employees at least four weeks' written notice.


What happens if the employee disagrees with the proposed changes?

If the change is covered by a variation clause within the contract, then technically you can make the change without the worker's consent, providing it is reasonable. However, employers should be aware that this can cause bad feeling and may lead to the employee seeking legal advice if they feel that the change is unreasonable.


If there is no variation clause in the existing contract, then it's important to try to find a mutual agreement. If not, the worker could refuse to work under the new terms, resign from their position, and claim constructive dismissal.


What is a collective consultation?

This is a legal requirement for employers to consult with employee representatives (usually on behalf of a trade union) if proposed changes affect a large group of employees.


As part of the consultation, the following elements must be discussed: reasons for the changes, ways to minimise impact on employees, possible alternatives or employee suggestions. If an employer fails to consult through this fair procedure, then employees or their representatives can bring about tribunal claims.



Let us bring clarity to employment law


We know employment law can be a headache, so if you need any practical advice or support, please don't hesitate to contact one of our specialists. Our priority is to secure fair and positive outcomes for both employers and employees, no matter what the workplace issue.


We look forward to hearing from you.





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