Change management – changing pay and working time

Change is an inevitable part of any organisation’s life.

There are various options you can consider when looking to make your organisation as viable and efficient as possible, but each of them requires careful consideration of the risks and costs.

Reducing pay

An employee’s pay will be included in their Contract of Employment. Employers cannot impose a pay cut as this would be considered a breach of contract. To avoid claims, you should talk to employees about the financial difficulties the organisation is facing and explain that this is being taken as a way to avoid redundancy.

If, after lengthy consultation and negotiation, you cannot reach an agreement, you can serve the individual employee notice that you will terminate the existing contract and offer a new contract with the new rate of pay. 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.

By acting reasonably and following a fair procedure, the dismissal should be considered fair, but it’s important to make sure that you have a good business reason for the change, have consulted with the employee(s) and made a real effort to get them to agree.

Increasing pay

When you increase an employee’s salary, employers can send the employee a brief note about their pay change and keep a copy for their staff file, rather than amending the contract. As this is a positive change, there is no need to consult with the employee.

Bonus and incentive schemes

If the bonus is contractual, the employer must make the payments if the employee meets the required criteria. In order to change this, you would need to get the employee to agree to the change or follow a consultation process.

If the bonus is discretionary, the employer can choose when and how the bonus is paid, so there is some flexibility to change the terms and conditions. However, employers must not use their discretion in an irrational, perverse or discriminatory way.

You can read more about bonuses here.

Normal place of work

In the employee’s Contract of Employment, there may be a mobility clause which allows the employer to move the employee to another location. In this case, the employee will be required to move to the new premises or workplace, subject to the employer exercising their discretion under that clause reasonably. What is considered ‘reasonable’ is not defined in any legislation, but for example, it would not be ‘reasonable’ to move across the country and only give them 24 hours’ notice.

If the employee’s contract does not contain a mobility clause, the employee is not obliged to move. Shoud you find they are digging their heels in and refusing to move, try and discuss different viable options with them, for example, consider a trial relocation period, offer compensation or think about flexible working arrangements.

If this does not work, a genuine redundancy situation may arise as their job at their current workplace no longer exists. The employee cannot unreasonably refuse any suitable alternative employment options. Again, what is reasonable would depend on the circumstances, so seek advice at the earliest opportunity.

Custom and practice

If an employer has a custom or practice, such as paying employees overtime for any additional hours, it can form part of the contract. This is the case even if the contract does expressly lay down this right. 

In general, this will be the case where the practice or custom:

·         is clear and certain

·         is fair and reasonable

·         has been going on for a long period of time (the law is ambiguous)

·         is known to employees and they have a reasonable expectation of receiving it

·         has been consistently applied to employees.

If you try and change a custom or practice, employees may argue that it cannot be removed without their consent.

Working time

The hours an employee works will be clearly set out in their Contract of Employment. If you are seeking to make any major changes to their working time, you will need to obtain their permission. If this is not possible, enter into a consultation process.  

Final thoughts

You need to take care in order to avoid unfair dismissal and breach of contract claims. You should be seeking legal advice at the earliest opportunity when making any changes to employees’ terms and conditions. Your Employment Law Adviser can advise you on what the best course of action is. They will draft all the relevant documentation. Get in touch to find out more about how Ellis Whittam can help your organisation.    

Director of Legal Services

James Tamm

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