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It’s quite common for employers to amend employees’ terms and conditions of employment from time to time, and in many cases, the changes will be welcomed by both parties.
Realistically, an employee isn’t going to complain about a pay rise or more flexible working arrangements – but what happens when proposals are less favourable? If employees resist contractual changes, what options are available to the employer?
As an employer, it’s important to understand the rules around changing terms and conditions of employment in the UK in order to avoid legal pitfalls. We answer some commonly asked questions about Contacts of Employment in general, and take a closer look at the points you need to consider before making amendments.
Do I need to provide my employees with a written Contact of Employment?
Contrary to popular belief, a Contract of Employment doesn’t have to be in written format in order to be legally valid. While it’s common for contracts to be signed physical documents, verbal agreements are just as legally enforceable as written ones.
However, if you enter into a Contract of Employment with an employee verbally and their employment is to continue for more than one month, you are required to provide them with a ‘written statement of employment particulars’. This should include, amongst other things, the following information:
- The employer’s name and address;
- The employee’s details – their name, job title, job description, start date;
- Salary, including payment intervals (e.g. weekly, monthly);
- Working time and holiday entitlements;
- Notice periods;
- Pension schemes; and
- Any applicable collective agreements.
This must be provided within two months of the employee’s start date.
It is strongly advised to have a written Contract of Employment. This may be supported by other documents, such as an Employee Handbook, to provide employees with important information on matters such as sick leave, your disciplinary and grievance procedures, dress code and health and safety.
Can I impose whatever terms I want, so long as the employee agrees?
No – UK law establishes certain minimum duties and obligations that all employers must abide by. For instance, you cannot agree with an employee that you will pay them below the applicable National Minimum Wage. The law will override any agreed terms that do not fulfil statutory duties.
Every Contract of Employment contains certain terms that are ‘implied’. This means that even though they are not written down, they are still understood to exist and need to be followed. For example, whether or not it’s explicitly mentioned in the contract, employers still have a legal duty to provide a safe working environment for all workers.
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Why might an employer want to change an employee’s terms and conditions of employment?
There are a number of legitimate business reasons why employers may wish to change an employee’s contractual terms. Common motivations include:
- A change in the company’s financial circumstances or a business restructure;
- The desire to harmonise contract terms across different teams or divisions; or
- It becoming necessary to change an employee’s duties, hours, pay rate, job title or place of work to meet the needs of the business.
Do I need to consult the employee before implementing a change?
While employers can change terms of employment, this will usually need to be agreed by both parties. Receiving express agreement from the employee is the safest way to vary a contract, as imposing new terms unilaterally may constitute a breach of contract.
If you are intent on making changes, you should meet with the employee (or, if applicable, their trade union or other employee representatives) to explain your case for making the proposed change. You should allow the employee time to consider the proposal and to put forward viable alternatives. For example, if the reason behind the change is financial constraints, the employee should have the opportunity to present other feasible solutions.
It’s likely that engaging the employee in the discussion and allowing them to express their views will make them more receptive to the change.
However, there are instances where contractual terms will change from time to time without the need for formal consent from the employee. A good example of this is pay rises; rather than varying an employee’s Contract of Employment, providing the employee with a brief note about the pay change (and keeping a copy for your records) would suffice. After all, an employee isn’t going to complain about a positive change to their terms.
If in doubt, it’s always wise to speak to an HR expert before making any changes. This will ensure you’re on the right path and help you to steer clear of any potential legal issues. For professional guidance and reassurance, call 0345 226 8393.
Can I insert a clause into a Contract of Employment that gives me the flexibility to make changes?
Employers do tend to insert clauses into employees’ contracts to allow them to make changes to the terms and conditions of employment. However, any changes must be reasonable, and you must provide sufficient notice. It’s also important that the right to make the change is written in specific terms, as a clause that is too general is less likely to be enforceable.
If this is something you’re considering, speak to a qualified Employment Law Adviser first for advice on how to draft these types of clauses and on their enforceability.
Do I need to provide the employee with information about the change in writing?
Where it has been agreed to vary an employee’s contract and the change relates to any of the particulars in the written statement mentioned above, you must give written notification of the change to the employee within one month of the change taking effect. This is a legal requirement under section 4 of the Employment Rights Act 1996.
If you change terms and conditions of employment that are not included in the written statement, you must inform your employees of where they can access information about the change, for example in your Employee Handbook or on your intranet.
The employee is refusing to accept the change. What can I do?
In this scenario, you should try to be flexible and be willing to compromise. Talk to them and give them time to consider and respond to your proposal. If, after lengthy consultation and negotiation, you’re unable to reach agreement, you can serve the individual employee notice that you will terminate their existing contract and offer a new contract with the new employment terms and conditions. If this is the route you decide to take, you must give the correct notice period to help ward off wrongful dismissal claims – although be mindful that claims can still be brought.
If you wish to do this with 20 or more employees, you have an obligation to consult collectively with employee representatives or, if applicable, trade union representatives.
In situations like this, support from an Employment Law expert is invaluable and will help to guide you in the right direction.
What happens if an employee brings a case for unfair dismissal?
If an agreement cannot be reached and you’ve exhausted all other avenues, terminating an employee’s contract and offering to reengage the employee on new terms may be the only viable option. This is what Asda are proposing to do if workers don’t accept its new Contract 6, which will see employees’ holiday allowances cut and paid breaks scrapped.
However, this brings with it the risk of unfair dismissal claims, even if the employee continues to work under the new terms, as they have technically been ‘dismissed’ from their old contract. An Employment Tribunal will treat cases like these in the same way as any other unfair dismissal case.
In order to defend unfair dismissal claims, employers must be able to show that they had a fair reason to dismiss and followed a fair procedure (which is where consulting with the employee will come into play).
In unfair dismissal cases relating to changing terms and conditions of employment, the outcome will often come down to the employer’s ability to demonstrate, with evidence, that they had a sound business reason for the dismissal. A Tribunal will judge reasonability from the perspective of a what a reasonable employer would do in the circumstances, meaning the reason you give mustn’t be trivial but also doesn’t need to be as extreme as to be the determining factor in your business going under.
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This negotiation is a vital first step even if the changes cannot be agreed. In the absence of agreement, and assuming there is no discretion in the contract to make the change being discussed, the employer is usually faced with two options:
- Unilaterally vary the contract. This is dangerous as it will usually lead to the terms being breached and opening the door for the employees to make a breach of contract claim. The reason for the breach would be irrelevant to this kind of contractual claim, so this would not normally be recommended as it gives the employer very little room for manoeuvre.
- Dismiss the employees on notice and re-engage them on the new terms. Whilst this opens the door to potential unfair dismissal claims, it is a better course of action as it introduces concepts of reasonableness into the situation. As a result, if you can show that the change was necessary for sound business reasons, and you have followed a fair procedure, there is every chance that you will be able to defend any unfair dismissal claims that may come your way.
Two important final points. Firstly, if the change involves dismissing and re-engaging 20 or more employees at one establishment, the requirement to collectively consult with either a recognised trade union or elected employee representatives will arise. Finally, you should always check that the changes proposed do not disadvantage a group of employees that share the same protected characteristic. If it does, there is a chance the change could be indirectly discriminatory.As ever, the key with these situations is to take advice from an Employment Law expert and plan the process carefully before you start.
In need of specialist support?
Contracts of Employment are fundamental to the employment relationship, establishing the rights and responsibilities of both parties and ultimately protecting your business interests. It is therefore essential that you get them right.
Whether you need help drafting new contracts, reviewing and updating your existing ones, or you’re looking to make changes, our Employment Law specialists can help to ensure your contractual documentation is robust, legally compliant and offers maximum protection for your organisation.