Making Changes to an Employment Contract
An employment contract is a legally binding agreement made between you, the employer, and your employee.
Employment contracts should be carefully worded with the guidance of a legal expert to provide certainty and clarity for both parties as to their relative rights and responsibilities. The employment contract should clearly set out the terms and expectations of both employee and employer to avoid future disputes. However, as businesses and their employees are constantly changing, it is to be expected that an employment contract may require amendments at a later date.
There may be instances where you may need to make changes to your contracts of employment. This can range from increasing the employee’s salary to changing benefits, working hours or place of work.
Employees have certain rights regarding their employment contracts, including the ability to insist on certain alterations to their contract. An employee could, for example, demand to follow a flexible working request rather than the traditional company working hours.
However, the general rule for employers looking to alter a contract of employment is that the employee must agree, either as an individual or through a trade union, to any changes you are proposing.
Lawfully changing employment contract terms requires careful navigation of employment laws and employee rights. Get it wrong and you may be at risk of tribunal claim.
When can you change an employment contract?
Changing the terms of an employment contract should only be undertaken if absolutely necessary. However, there are instances where altering the terms of an employment contract may be justified, for example in response to:
- Changes in the law or business regulations
- Business restructuring
- Annual pay reviews
Employers can only request changes to an employees’ contract which are deemed reasonable.
Examples of the kinds of changes you may seek to make include:
- Changes in roles and responsibilities of the employee
- Changes in the business hierarchy and structure
- Changes in working hours or shifts
- Changes in location
Changes which would be considered unacceptable in the eye of the law include:
- Expecting an employee to relocate to another country at short notice
- Drastically altering and employees’ hours,
- Reductions (even small ones) to an employees’ wage
- The removal of specific perks like a company car
- Restructuring the company in a manner which could be considered to give the employee in question a demotion
To try and force these terms upon an employee, for example by threatening termination of their employment unless they agree, could give rise to a claim for unfair or constructive dismissal.
Similarly, if you are seen to try and make changes to a contract unilaterally, i.e. without properly consulting the employee, making them fully aware of the changes and all their implications, and getting their approval, the employee would have grounds for a strong case against you.
It will be important to check if the original contract included variation terms or a flexibility clause, which may enable you to make certain contract changes without prior employee agreement.
A variation term would relate to a specific aspect of the contract and give you, the employer, the right to make a change to that specific aspect of the contract without the employees’ consent. If the employment contract does have a variation term relating to the change you want it is still best to discuss the change with the employee but your legal position is much stronger. You would still be unable to make a change which was seen as “unreasonable” without legal ramifications and should check your case before putting any changes into practice.
A flexibility clause is more vague. The clause gives the employer the ability to alter the duties of the employee, within reason. Under a flexibility you could require an employee to take on additional tasks, or adjust their hours, but what would be considered a “reasonable” change is very case specific and use of this legal leeway should be undertaken with caution.
How to change an employment contract.
Assuming you have justifiable cause for requesting changes to the terms of employment, you will need to come to an agreement over how the contract is modified either with the individual employee or with their representative Trade Union.
Consultation: The first step in altering an employment contract is to consult with affected employee(s) and determine whether they are willing to accept the new terms.
If the employee is happy to make the change, the process should be relatively straightforward. It is your responsibility as the employer to submit written notification of the altered terms to the employee, or employees, affected within 4 weeks. You may receive some acknowledgement of accepting the new terms from your employees or you may receive no response at all, in both cases this nullifies the employees right to reject the change at a later date.
In some cases, the employee may not agree to the terms outright but is willing to negotiate. In these circumstances, you must provide alternative changes to the terms and consider any that the employee brings to the table. If at all possible, mutually agreed upon terms should be negotiated with the employee without the need for additional steps. If an agreement is made after negotiation, the employer would again notify the employee in writing within 4 weeks for the terms to be official.
If an employee will not agree to the proposed changes to their employment contract, it would not be lawful to make the changes anyway. If negotiations break down, you may be able to terminate an employment contract utilising the existing employment terms of notice. In some cases it is possible to then offer the individual a new contract with your required changes written into the agreement. This process is effectively firing to re-hire. This approach should only be taken in certain circumstances and with legal advice as it may put you at risk of being accused of unfair or forced dismissal.
With a Trade Union:
If your employees are members of a Trade Union, changes you wish to make to their employment contracts must be negotiated via their representatives in what is known as “collective agreement”. As the employer, you will need to meet with the relevant Trade Union representatives and consult with them over the changes you wish to make to the contract or contracts. The Trade Union will either accept, reject, or negotiate with you and reach an agreement over how to alter the terms. Trade Unions speak on behalf of the employees, so should negotiations go well you are able to change multiple contracts without going through the process with each individual employee. However, should your communications break down, the Trade Unions have a lot of power both legally and in their ability to impact on your business, e.g. through the organisation of strikes.
Why seek legal advice?
To ensure your changes are lawful and that you follow the required steps, it is advised you seek legal advice before staring negotiations with affected employees to mitigate the risks of breaching your legal duties.
You should also be aware that the courts have a strong record in supporting the employee in employment contract disputes.
Seeking legal advice from the very outset of negotiating changes to employment contracts is your best chance of reaching a mutually acceptable resolution and achieving the necessary alterations to employment contracts, without legal ramifications.