Changes to Employment Contract Terms
There may be times that arise where you need to make a change to employee terms and conditions, such as hours, place of work, job description etc. On most occasions the changes are easy as they will be agreed, for example increases to wages or salary. Other times the changes may be more contentious and employees not so willing to agree to the change!
When considering changes, it is important to remember that, even if there is nothing in writing, terms may have been agreed verbally or by implication, i.e. the actions that you have both been taking.
Express terms = terms that are agreed between you at some point in the relationship, verbally or in writing, in the form of a contract or some other correspondence or document.
Implied terms = terms that have become implied into your relationship either by the actions you take, custom and practice in your organisation or industry, or terms implied by law.
So, what do you need to consider if you want to make changes to an employee’s terms?
1. What are the current terms and are they express or implied?
The first step is to establish what the term is that you are intending to change. Is this set out in writing or expressly agreed at some point or has it arisen by implication?
2. What is your reason for making the change?
It is important to be clear what your reasons are for making the change. For example, is it because you need to make the change to fulfil a customer’s requirements; or is it because you need to save money; or is it for the better running of your business?
3. What is the potential impact of the change on the employees and can this be mitigated in any way?
If you consider ways in which you can ‘soften the blow’ of the change it can help to get agreement and reduce conflict. For example, you need to change the shift pattern for staff, but you know that two employees travel by public transport and it could cause them difficulty, so you agree that they can start earlier or later to time the shift with the bus/train.
4. Is the change one which is likely to be contentious?
It will help you in making the change and communicating the issue in the best possible way, if you plan and understand exactly what it is you are doing rather than launching into the next stage without planning.
How to make the change to terms of employment
1. Get agreement from the employee
Getting your employees agreement to the change is always the best way to make a change to contract terms.
Often if you take the time to consult with employees, involve them in the changes and explain the reasoning behind it most employees will eventually agree. Clearly this does depend on the change you are making but being open about the reasoning can help. For example, you need to change hours as the customer has demanded the change in order to keep the contract, if you explain to the employees that without making the change you will lose the contract and as a consequence risk redundancies they will be more likely to agree.
If the change is not likely to take effect until later, then it is important to agree the change in writing.
A tactic that you may consider with regards to contentious changes is to consider timing their implementation with your annual discussions on pay reviews and make it a condition of the pay review that they agree to the new contract terms.
You may get one or two people who will not agree, or will cause difficulty, regardless of your reasons or how well you handle it, and once you have exhausted all options for agreement you can move to the next two options.
2. Impose the change
If it is a change that you have control over and you have been unable to reach agreement you could impose the change unilaterally.
For example, you want to change the pay date from weekly pay to monthly pay, but one or two employees have refused to agree. You do not need to continue to pay them weekly just because they have not agreed, and you can start paying them monthly.
The danger with this is that the employee could make a claim in the Employment Tribunal. They could resign and claim that you are in breach of a fundamental terms of the contract and therefore claim constructive unfair dismissal. Alternatively, they could remain employed and make a claim for breach of contract and claim compensation for their loss because of your breach.
Where the changes are substantial they could also claim unfair dismissal on the basis that they had been ‘dismissed’ from the previous contract and re-engaged on new terms, even though there is no break in their employment.
When deciding if the changes are substantial or not the Employment Tribunal will look at the facts and circumstances on a case by case basis.
In the example of changing their pay date the employee could also attempt to make a claim for unlawful deductions from wages, but this is unlikely as you will be paying them within a couple of weeks and they many not even get the opportunity to go through the ACAS Early Conciliation process before you pay them.
Of course, imposing the change is only going to work where you are in control of the change, if you are not then you have a final option of giving notice.
3. Give notice and offer new terms
The third and final option you have, if the change cannot be agreed, is to give the employee notice to terminate their employment on the current terms and make an offer to re-employ them on the new revised terms.
The danger with this approach is that the employee makes a claim for unfair dismissal.
If the employee makes a claim for unfair dismissal you may be able to defend the claim on the basis that your fair reason for terminating their employment is ‘Some Other Substantial Reason’ or (SOSR) and you have good business reasons for the change.
Because of the risk of a claim for unfair dismissal it is important to follow a fair and reasonable procedure in the lead up to the termination.
Points to note when considering making changes
Transfer of Undertakings (TUPE)
If you are making changes to contract terms following a transfer of employees under the Transfer of Undertaking Regulations (TUPE) there are other considerations as a change because of the transfer will be void, regardless of the employee’s agreement – it is therefore very important to seek advice before making changes.
Trade Union (Collective Agreement)
If your organisation recognises a Trade Union then I recommend that you seek advice before starting discussions about change as it is likely you will need to involve the Trade Union in the consultations, and you will certainly be required to do so if the changes are subject to collective bargaining.
Equality Act and Discrimination
It is important to be mindful of any changes that you may make which could be detrimental to, or cause disadvantage to, employees on the basis of one of the protected characteristics.
The protected characteristics are: Age – Disability – Gender reassignment – Marriage and civil partnership – Pregnancy and maternity – Race – Religion or belief – Sex – Sexual orientation.
If you are in any doubt seek advice at the earliest opportunity.
Impact on your business and productivity
Many employers overlook the impact that making changes, even seemingly minor changes, can have on morale and in turn productivity. It is important in the planning stages (see above) to keep this in mind and whilst you may feel that it is a necessary and minor change it may have extreme consequences for the employees involved. If handled badly you could see a drop in productivity and at worst you could lose your best employees and find yourself defending an Employment Tribunal claim.
As always communication is the key to minimising impact and staying a great employer!
Consideration (Some benefit for the employee)
For a change to the contract to be binding there must be some ‘consideration’. This is basic contract law which states that in order for there to be a binding legal contract there must be something in it (some benefit or consideration) for each party. In an employment contract the consideration from the employer is pay and employee is performing the work.
Therefore, in most cases the fact that the employee continues to be employed (and therefore receive pay) is sufficient consideration. However, if the change to the contract does not have immediate effect then you may need to factor in some additional consideration for the employee. This is where making the change at the same time as the annual salary increases or bonus payments etc may assist you.
Frequently Asked Questions
The employee’s contract states that we can make changes to the contract at any time. Why can’t we just change the terms?
Whilst it is a good idea to include this clause in the employment contract, you are only likely to be able to rely on this to make minor and uncontroversial changes to the contract if a dispute were to arise.
You can of course point the employee to this clause when you are discussing the changes and it may be that this is sufficient for them to agree the change.
What will the Employment Tribunal consider if I give notice to an employee and offer a new job on new terms and the employee rejects the offer and makes an unfair dismissal claim?
The Employment Tribunal will look at whether you have involved the employee in discussions and consultation about the proposed changes and reasons for them. What you have done to try to engage with the employee and consider alternatives.
They will also look at the employee’s reasons for rejecting the change and if most of their colleagues have accepted the change.
You will also need to demonstrate to the Employment Tribunal that you have sound business reasons for the change and that your motives are business driven.
I have heard that an employee could say they are redundant if I impose the change to their contract terms is this true?
If there are a several employees who are being given notice and offered re-engagement, then it is possible that the dismissal could be treated as redundancy.
It is important to keep this in mind if there are 20 or more employees who are being given notice as the collective consultation obligations will apply.
Does the employee have to sign a new contract to accept the new terms?
Whilst best practice is of course to chase the employee to return the signed copy, it does happen, and therefore if the employee does not raise an objection to the new terms but continues to work under them, if a dispute arises later you will need to demonstrate that the employee had accepted the amended terms by their actions.
This can be difficult where the only changes were of a disadvantage to the employee, for example including post-termination restrictions.
Therefore, it is important to get a signed copy of the contract back from all employees and hold a copy on their personnel file.
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