Best Practice For Varying Contracts Of Employment

A contract of employment is a legally binding agreement between an employer and employee. In the UK, the term ‘employee’ is defined by the Employment Rights Act 1996 as an individual who has entered into or works under a contract of service or apprenticeship.

In the UK, a contract of employment can consist of express terms, which must comply with any minimum legal standards such as the right to paid holidays and the right to daily and weekly rest breaks, and implied terms which are usually not stated in the contract but are incorporated in some other way, for example a duty of mutual trust and confidence between the employer and employee.

All employees from 6th April 2020, have a statutory right to a written statement of particulars of employment setting out certain key employment terms on or before their first day of work.

Can I make changes to an employment contract?

Varying existing contractual terms normally requires the employee’s agreement.

An employment contract may include an express term, which states that the particular section is variable by the employer, and as a result it can appear that it is acceptable for the employer to make changes to the contract of employment without consent from the employee. However, an express clause in the contract does not guarantee that the employer can make significant variations to an employment contract, in particular any which would be of detriment to the employee, without agreement.

For an employer who wishes to alter the terms of an existing employment contract, which will have significant impact on the employee, the CIPD outline three main options for employers:

  1. Agree the changes with the employee after thorough consultation – this is the safest course of action, and employers could consider offering a small incentive to encourage acceptance, e.g. a pay review.

 

  1. Make changes unilaterally – even where there is a pressing business need to impose the changes, this may be risky. In some circumstances the employer may assume acceptance if the employee continues to work without objection. However, the employee may choose to continue to work, but do so under protest and bring an action for breach of contract. Alternatively, the employee may resign and bring a claim for constructive unfair dismissal and/or wrongful dismissal.

 

  1. Terminate the employee’s contract by notice and offer them re-engagement on new terms and conditions – an employer may consider this option where changes cannot be agreed and where it appears too risky to impose the changes unilaterally. The employer must then offer re-engagement on the new terms immediately. Employers should be aware that in legal terms this may be considered to be a redundancy dismissal, so they should follow any rules around collective redundancy and consultation time limits. This course of action is not without risk: the employee may claim breach of contract or unfair dismissal, although any compensation will be limited as the employer is offering re-engagement.

Any variations to contracts of employment should be confirmed in writing to the employee within one month of the changes taking place.

Some additional points for employers to consider;

  • While there is no legal requirement for employees to sign their contract of employment, it’s easier for an employer to rely on any clauses if they have done so;
  • Where employers wish clauses to be non-contractual, they should state this clearly when inserting them to ensure they cannot be relied on as implied by custom and practice; and
  • Employees’ requests to change their terms and conditions must be considered, especially for employees who have worked for the same employer for at least 26 weeks, under the legislation for flexible working.

If you would like further guidance or support on this matter or require advice on other people management matters please contact Clover HR on 0121 516 0299 or email us at info@cloverhr.co.uk

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