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Varying Terms and Conditions of Employment

During employment relationships, terms of employment can change to keep up with changing circumstances, such as pay rises. Minor changes often happen frequently, such changes normally can be easily agreed and are unlikely to cause any legal or practical problems for employers.

The main difficulties usually arise when a business wants to introduce a major change or new fundamental term to the contract and the employee does NOT consent.  The law states that contracts can only be changed by agreement, if an employer tries to force a change, ie a unilateral change, this will be a breach.   Forcing through such a change without agreement may expose your business to claims of breach of contract and constructive dismissal.

Not all proposed changes will involve such a fundamental change to a term of a contract.  A business needs to consider each proposed change carefully.

What the Business Should Do

We suggest you look at the employee’s present duties, their contracts of employment and then the proposed changes; you may find that for some employees there is in practice very little change to their contract.

But what do you do when you have to make a change that is not covered by any of the above?


1.       Change by agreement

This is all about a consultation process. There are no strict legal guidelines as to how to implement the proposed changes by agreement. Be sensitive to each employee’s situation.  However, it is wise to ensure that you give each employee at least one-month period to consult with you over the proposed change.

If you can reach an agreement put it clearly in writing as soon as possible, inform the employee of the date the change will be implemented. You may consider issuing a new contract for signature.

It may be that you decide to offer a small incentive for the change, such as a bonus or enhanced holiday rights.  This will help if a court or tribunal had to decide on this issue.

Imposed change

If you are unable to agree the change you will first have to consider if the needs of your business to make the change are so important that they justify imposing the change regardless of the risks.

If so, there are two possible basic approaches, both of which expose the business to legal risks and potential damage to employee relations, if you are unable to get the employees to agree to the change suggested after consultation:

  1. Forcing the change to the existing contract by simply announcing the change and implementing it with notice.
  2. Terminate the existing employment contract with their full notice (whilst complying with recognised dismissal procedures), and offer re-engagement on a new contract which sets out the new terms and conditions.

If you take the first approach, the employee may accept the change despite their initial protest. However, they may continue to protest, insist on the terms of the original contract and either bring a claim for breach of contract or resign and claim unfair constructive dismissal.

Alternatively, they could work under the new terms, but “under protest” which means that they reserve their right to claim breach of contract or may resign and claim unfair constructive dismissal.

However, if there is a reasonable consultation process you are more likely to be able to defend such claims and more likely to minimise any compensatory payments by showing that you adopted a reasonable procedure throughout.

ActifHR can guide you through the process of varying employees’ contracts of employment on a step by step basis.

For more information on other HR Policy support from ActifHR, click on another employment topic from the list on the left of this page.