Changing the Terms and Conditions of Employment

27 July 2020

Employers have the right to amend employees’ terms and conditions from time to time. Employers will sometimes find the terms and conditions offered to an employee at the start of their employment are no longer appropriate.

Not all changes are negative, some will be well received. These include pay rises or the addition of flexible working—but what if the updates are less desirable?

Unilateral changes (one-sided decisions) to terms and conditions should be avoided, they may lead to claims for breach of contract, constructive dismissal or discrimination claims.

It can be difficult to navigate these changes, so it’s important as an employer to know the rules around contract updates so you don’t invoke an unfair dismissal claim.

Remember, you can refer to our HR documentation and contract services for immediate help with this matter if you want to cut to the chase. We’re here to help.

Can an Employer Change a Contract?

Yes, you may change an employee’s contract—this is called a 'variation of contract'. An employer can force a new agreement on employees, although this should be a last resort and could lead to legal action.

It is a legal requirement to explain clearly the effect of any change. For example, a change to wages or working hours.

When Can an Employer Change a Contract?

As an employer, you can make changes to an employment contract in the following circumstances:

  • There’s a provision within the contract that allows for the change, often referred to as a flexibility or variation clause.
  • By mutual or collective agreement. For example, where the employee individually agrees to the change, or where an agreement is negotiated between you, as the employer, with a trade union or staff association.

Changing a Contract of Employment Lawfully

A contract of employment is a legal agreement between you and the employee. You can’t lawfully change its terms without agreement from the employee (either individually, through a recognised trade union or through elected employee representatives.).

Where a trade union is recognised, negotiations to change contract terms should be through collective bargaining.

An unauthorised, one-sided variation is likely to be a breach of the contract of employment. If you provide the employee with notice of a change, that doesn't make it lawful.

You may choose to dismiss and rehire an employee if the two of you can’t come to an agreement. However, could lead to claims of constructive dismissal

Changes an Employer Can Make to a Contract

There are several things you may wish to update. Updates can range between any of the following:

  • Pay cuts
  • Changing your hours of work
  • Your place of work
  • Your job duties
  • Entitlement to sick leave
  • Fringe benefits or perks
  • Contractual maternity rights
  • Contractual redundancy rights

Changing Terms and Conditions of Employment After TUPE

TUPE is a set of regulations that protect employee rights during a business transfer. It’s a major part of employment law that usually applies during business mergers and acquisitions.

The regulations aim to protect employees in the event of a service provision change, or when a business is bought or transfers to another employer. If the new employer doesn’t meet the pre-established terms, it’s a breach of contract.

So if a member of staff asks, “Can my new employer change my contract after TUPE?” The answer is no.

TUPE is valid for a two year period, meaning the new employer has to stick to the existing terms for this period, after which it can bring in new policies. Changes can be made but are only possible if the sole reason for them does not relate to the transfer. For example, there could be an organisational change in response to customer demand.

Do You Need to Consult the Employee Before Implementing a Change?

Receiving expressed agreement from the employee is the safest way to vary an agreement, as imposing new terms unilaterally may constitute a breach of contract.

If you’re sure of the alterations, you should consult or negotiate with employees or their representatives and explain the reasons for the alteration.

If a contract contains a flexibility clause, the employer has a right to amend some employment conditions, such as location, but only if the amendments are reasonable.

There are instances where contractual terms will change from time to time with no formal consent from the employee.

A good example of this is pay rises. Rather than varying an employee’s contract of employment, providing them with a brief note about the pay change (and keeping a copy for your records) would suffice.

Sometimes you can alter the agreement without the employees’ consent, this is through variation clauses or flexibility clauses.

What is a Variation Clause or Flexibility Clause?

This is a clause you can place in a contract that allows you the right to change some conditions of employment.

You must draft the clause in a way that clarifies you have the right to vary the contract, without the consent of the employee.

These have to be reasonable alterations, however. An employer couldn’t ask an employee to relocate with a weeks' notice, for example.

Just because there’s a flexibility clause enabling you to make the change, doesn’t mean that you should always use it. It’s usually best to involve the employee in the changes to keep the relationship positive.

Does an Employee Have to Agree to Changes?

No, an employee doesn’t have to agree to the terms you have put forward if they’re unhappy about a change to their contract. It’s good business practice to continue discussions with the staff member until you reach an agreement.

The employee may enter a state of ‘working under protest.’ This is where they’ll continue to work but not agree to the terms presented by the employer.

If you can’t find a compromise, then you might decide to dismiss and rehire ('re-engage') the same employee under a new contract. This should be a last resort and only after consulting them.

If deciding to dismiss and rehire, you should ensure that they follow a fair dismissal procedure, give personnel enough notice (statutory notice or what's in their agreement– whichever is longest) as well as offer the staff member a right of appeal against their dismissal

The changes proposed can't take place until the staff member has been dismissed and has begun working under the new agreement.

How Much Notice to Change the Contract of Employment is Needed?

You can’t make changes to the employment contract without notice. Having secured an agreement for an amendment of the contract, you should provide a written statement of these amendments to each affected employee.

Although not all changes of the individual’s contract need to be set out in writing, you must give written notification within one month of any changes that relate to the employee’s main terms and conditions, such as working hours or job location.

What Happens if an Employee Brings a Case for Unfair Dismissal?

If you and the employee can’t reach an agreement and you’ve exhausted all other avenues, terminating an employee’s contract and offering to re-engage the employee on new terms may be the only viable option.

However, this brings with it the risk of unfair dismissal claims, even if the employee continues to work under the new terms, as they have technically been ‘dismissed’ from their old contract.

An employment tribunal will treat cases like these in the same way as any other unfair dismissal case.

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