Over time, you may need to adjust an employee’s terms and conditions, for example, changing working hours, reducing pay, altering roles, or updating policies. However, an employment contract, like any contract, generally cannot be unilaterally changed by one party without the other’s agreement once it’s in force. Changing terms improperly can lead to breach of contract or constructive dismissal claims. Here’s how to go about it:
- Consultation and Agreement: The golden rule is you must consult and seek the employee’s agreement for any significant change in terms. This could be an informal chat for minor tweaks or a formal process for major changes. Explain the business rationale for the change and how it affects them. Often, if the change is neutral or positive (like a pay increase or improved benefits), agreement isn’t an issue! But if it’s perceived negatively (reducing hours, cutting benefits), you need to be prepared to negotiate or justify.
- Contractual Flexibility Clauses: Some contracts include certain flexibility clauses (variation clauses) giving the employer a limited right to change specific terms. For example, a mobility clause might say “we reserve the right to require you to work at any of our locations within 30 miles of X upon reasonable notice” – that gives flexibility to relocate the employee within that radius. Or a clause might allow for changing working hours to meet business needs. However, courts interpret these clauses narrowly – they can’t be used as a blank cheque to change anything and everything. And they must be exercised reasonably and with notice. If a contract says “we can vary terms at our discretion,” that’s too broad and likely unenforceable in entirety. In any case, even with a flexibility clause, good practice is to consult before invoking it.
- Changes required by law: Sometimes, changes are needed to comply with new laws or regulatory requirements. For instance, an increase in minimum wage or a new legal requirement to include certain information in contracts (like the 2020 changes to written particulars). Those you can implement because you must – but it’s still good to inform employees, “we are updating your contract to reflect X law.” Generally, employees won’t object to changes that bring them into line with legal minimums or better.
- Process for Changes: If you have a union or collective bargaining, you’d negotiate with the union for changes affecting those employees. For non-union staff, you should meet with the employee(s) individually (or collectively if many are affected) and outline the proposed change, the reasons, and listen to their feedback or alternative suggestions. If employees understand the business reason (e.g., needing to change shift patterns to meet customer demand), they may agree, perhaps with some compromise.
- Consent in Writing: If an employee agrees to a change, you should record it in writing – ideally have them sign a simple variation agreement or a letter that states “As discussed, we agree to change [the particular term] to [new term] effective [date]. All other terms remain unchanged.” That way, you have proof of their consent. This variation becomes part of the contract going forward.
- Imposed Changes and Risks: What if an employee does not agree? Imposing a change without consent can lead to several outcomes:
- The employee may accept the change implicitly by continuing to work under the changed conditions without protest. Over time, their inaction might be seen as acquiescence and the contract is treated as varied. But this is risky – if they later object (within a reasonable period), they might still have a claim.
- The employee may protest or refuse to work under the new terms. For example, if you cut their pay, they might work under protest and file a grievance or even a legal claim for unlawful deduction of wages. If hours are changed, they might not turn up at the new times because that wasn’t agreed.
- If you force the issue, the employee could resign and claim constructive dismissal, arguing you fundamentally breached the contract, leaving them no choice but to resign. They’d need 2+ years service to claim unfair constructive dismissal and prove the change was fundamental (e.g., a big pay cut or moving work location 100 miles away could qualify). That could lead to compensation if they win.
- In some cases, the employer might decide to terminate employment with notice and offer re-engagement on new terms. This is a “dismissal and rehire” tactic. It’s a last resort and has gotten a lot of negative attention (e.g., “fire and rehire” controversies). If you go this route, it is a dismissal – employees with enough service could claim unfair dismissal, so you’d need a fair reason (usually “some other substantial reason” – business reorganization) and you must have consulted genuinely and considered alternatives before taking this step. Even then, an Employment Tribunal will scrutinize if you acted reasonably. This approach can damage morale and reputation, so avoid unless absolutely necessary.
- Minor changes: For very minor changes (like a trivial change in job title that doesn’t affect status or pay, or a slight shift in start time by say 15 minutes), some employers just implement and assume implied consent if no one complains. While technically it’s still a change requiring consent, practically if it’s minor and doesn’t cause detriment, employees often won’t mind. But always be cautious – one person might mind even if others don’t.
- Changing policies or benefits: If something is not explicitly in the contract but in a handbook (and that handbook is stated to be non-contractual), you have more leeway to change it unilaterally. For instance, if your handbook (non-contractual) says you offer 5 days paid bereavement leave, you could change that policy to 3 days going forward by updating the handbook and informing staff, since it wasn’t a contractual entitlement. However, if the handbook was contractual or it’s a well-established custom that effectively became part of terms, then you’d still want to consult. It’s always better for employee relations to discuss changes even if legally you might force them.
- When changes benefit the employee: If you are improving a term (like giving a pay rise, or reducing hours for same pay), you still should confirm it in writing, but you won’t have trouble with consent. No one complains about a beneficial change, but formalize it nonetheless for clarity (e.g., a letter confirming salary increase).
- Documenting Contracts Are Up-to-Date: Whenever you do change terms, ensure both your copy and the employee’s copy of the contract (or at least their personnel file) have a record of that change (like the variation letter). This avoids confusion later. Legally, if you change any of the “written particulars” that must be provided (the list from Q1 – pay, hours, etc.), you should give the employee a written statement of the changes within one month of the change coming into effect. So there’s actually a legal duty to inform in writing of changes to main terms.
- Consensus is Key: Often, explaining the need and maybe offering something in return can win consent. For example, “We need to change your shift from morning to evening; I know that’s inconvenient, so we’re offering a 5% shift premium increase” – carrot approach. Or if reducing benefits due to cost, share the business situation openly; employees may accept a cut if it means saving jobs, for instance, if approached collaboratively.
Remember that from an employee relations perspective, handling changes poorly can erode trust. Even if someone doesn’t sue, they’ll remember being strong-armed. So try to maintain goodwill.
If you’re unsure about how to approach a significant contractual change, get advice. Employers sometimes consult with HR experts or legal counsel, especially when undertaking a major restructuring. Be aware of the collective consultation rules. If you are contemplating changes that effectively amount to dismissals and re-engagement of 20 or more employees, collective consultation requirements (such as 30-day consultation) could be triggered, similar to redundancies.
In summary, yes, contracts can be changed, but only with mutual agreement or following proper legal process. Your employees’ terms are not set in stone for eternity, but you must handle alterations carefully. Many issues can be headed off by having well-drafted contracts from the start that include reasonable flexibility where anticipated. British Contracts can review contracts and advise on amendments at highly competitive fixed fees under our Bronze and Silver packages. We can draft bespoke contractual documents, such as contract amendments, and provide advice on how to implement them for very competitve fixed fees under our Gold and Platinum packages. Approach contract changes as a negotiation, not a command, and you’ll navigate it much more smoothly. Always document the outcome so the contract on file is current and accurate.