Fundamentally, you can’t change the terms of an employment contract without the other side's agreement. All contracts are made up of legally enforceable promises, so each side knows where it stands and so that you’re protected if the other breaks their side of the deal.
But employment contracts can become outdated. From time to time you’ll have to think about making a few changes.
Some changes will be small and may seem inconsequential. Others will radically affect the employee’s day-to-day work or their entitlements. Perhaps they’ve been promoted, so their contract must be brought in line with their new status and responsibilities. Maybe you are relocating your business. Or perhaps you’re having to look at costs savings and need to cut back on employee benefits.
And there’s always the changing face of employment law to consider, as well as evolving custom and practice.
Step 1: Is the change beneficial to the employee?
There are some changes which you will be able to implement very quickly and without much fuss or disruption. What employee is going to object to a pay rise, for example? Where the employee stands to gain from the change, you’ll probably have an easy ride. By agreeing the change between yourselves, you’ll be able to update the contract by mutual consent - by far the safest and simplest way. It cuts out a lot of technical contractual and employment law issues.
You’ll need to issue written notification of the change within one month of it taking effect. The easiest way is to simply issue a new contract, or a written addendum, and get it signed by the employee.
Not all proposed changes will be welcomed, and this is where employment law and contract law claims lurk.
Step 2: Check whether you need to change the contract
The wording of the employee’s contract is always the starting point.
What are the terms of the contract? They can be express, implied, incorporated or statutory terms. (This sounds complicated, and it can be, so it’s worth running this past us.) If the change doesn’t affect the terms, then great – you should be able to introduce the change without having to get the employee to agree to it.
A word of caution about being too bullish here. Even if the change you want to make isn’t a contractual one (i.e. you are technically able to make it because it doesn’t affect the contract), you still owe the employee a duty of trust and confidence. Tell them about the change and why you’re planning to introduce it.
Step 3: Does the employment contract allow the change?
The contract may contain a 'variation clause', which allows you to make certain changes.
But courts are always reluctant to allow employers to use variation clauses in a way which impacts negatively on employees' rights. The bigger the impact, the more a court will look for a reason to declare the variation clause invalid. So it's worth checking with us first.
Step 4: Impose the Change
Remember that it’s unlawful – a breach of contract – to change the terms without the employee’s consent. You have options, but you’ll need to tread carefully.
- Option 1 – get the employee’s agreement
- Option 2 - implement the change without agreement
- Option 3 - dismiss and then re-employ the employee
The big message in all of this is that, while terms and conditions in any context are a protection mechanism for both parties, they’re not set in stone. If there are sound commercial or operational reasons for needing to bring about change, it’s time to look at your options. Some options carry more risk than others, and it’s the level of risk that you’re prepared to accept that will determine the route you take.
This an area we advise on regularly, so please get in touch with Alison Gair, Head of our Employment Department, if you'd like to discuss the options further.
*In this article, we have assumed that you don't recognise a trade union.