A change of employment contract terms can present legal risk for employers and can raise significant concerns with affected employees.
In this guide for employers, we explain the legal position on varying contract terms and how to approach any such change with individuals to reduce potential for complaints and negative impact on working relations and morale.
Can employers change employment contract terms?
In most cases, employers cannot lawfully change contract terms without first having each individual’s prior agreement, unless the contract allows them to do so under a specific flexibility clause. The flexibility clause, also referred to as a variation clause, being relied on must permit the employer to change the particular term in question.
To ascertain if you have the contractual right to make the change, you will need to refer to the individual’s employment contract. Where a relevant clause is identified, you will need to understand if the wording of the term supports the change and if the term includes any additional provisions or requirements in order for the change to be made, such as giving requisite notice of the variation.
If the wording of the flexibility clause is not clear or does not support the change being proposed, the individual may be able to refuse or challenge the change.
In some circumstances, the change may be implied where the individual has already worked under the new or changed conditions for a significant period, unless they are specifically ‘working under protest’, as we discuss below.
This is a highly technical area requiring specialist legal advice to understand your position in light of previous tribunal rulings and to understand the obligations on you to avoid being subject to a grievance or tribunal claim.
How to change employment contract terms
Before making a change to an employee’s contract, you should first obtain their consent. You can do this by discussing and explaining the proposed change with the individual or their representatives, if relevant. You should provide full details of the change and the reasons for making the change. You should also use this as a consultation and listen to any suggestions, feedback or alternatives that the individual puts forward.
If the employee accepts the change in contract terms
If the individual agrees to the changes, the new term should be incorporated into the contract of employment and you should provide a copy of the revised contract to the individual within one month.
If the employee does not accept the change in contract terms
If the change is permitted due to a flexibility clause in the contract, technically you can bring in the change without the individual’s agreement provided the clause allows this and it is reasonable in the circumstances. Likewise, if the change is covered by a statutory right, the employer can insist on the variation. However, employers should be aware that imposing changes can be detrimental to employee relations, so it is important to proceed with caution, and to be open and clear about the reasons for the change.
If the employee has concerns about the proposed changes, they should raise these with you as soon as possible, ideally as part of the consultation and discussion phase.
In the event there is no resolution through informal negotiations, the employee may choose to raise a grievance under your organisation’s internal procedure. They could refuse to work under the new conditions or they could decide to resign and claim constructive dismissal.
Alternatively, they may continue to work but state that they are working under protest and that while they continue to do their job, in doing so they are not accepting the change in terms. Working under protest is a temporary status applicable only while the matter remains unresolved. To rely on working under protest, the employee will need to make their employer aware of their objections to the contract change. This should be done in writing on a regular basis, for example each time they are paid, to reconfirm the position while in dispute.
Fire and rehire
IN extreme cases, the employer may move to terminate the employee’s contract and rehire them on a new contract with new terms and conditions. This is known as ‘fire and rehire‘. The employer must ensure they follow the relevant redundancy procedure.
This course of action is considered high risk as it is generally considered damaging to workforce relations and the employer brand, while exposing the employer to potential claims for unfair dismissal and breach of contract.
Employers may, as a last resort, end a contract and re-employ someone on new terms and conditions.
Breach of contract
It would generally be a breach of contract by the employer to impose changes to a contract without prior consent where the employer does not have authorisation (such as under the variation clause), regardless of whether adequate notice is given. Breaching the terms of the employees employment contract can give rise to claims and damages.
Employees are protected from breach of contract in relation both to express provisions within the signed contract of employment or where it is a right implied by law, such as the duty to pay wages.
In most cases, employers and employees are expected to try and resolve workplace disputes – such as breach of contract terms – informally as soon as they arise. Where this fails, the employer should have an organisational internal grievance procedure to allow employees to raise a complaint formally.
Only where these routes have been exhausted would employees usually pursue litigation, either bringing an employment claim to the tribunal and/or a claim for breach of contract.
The legal options will also depend on the nature of the dispute. Employers should ensure they follow the correct grievance procedure when handling workplace disputes to avoid escalating grounds for complaint.
Can an employee request changes to their contract?
It is open to an employee to request changes to their contract, but the employer will have to accept these proposals and are generally under no legal requirement to agree. Much will depend on the nature and circumstances of the change. For example:
- If the employee has already been working to different terms, for example, they have started a different role for the same employer, it would be reasonable to ask that this change is reflected formally within the contract.
- If the employee wants a flexible working arrangement, they should follow their employer’s procedure to make a flexible working request.
In most other circumstances, it will be a matter of raising the query with the employer and discussing what the change is and would mean. The employer can then consider the request and can raise any concerns or objections to the change. This may also involve negotiating and comprising to come to an agreement that both parties are happy with before the change is accepted.
If the employee refuses the change, the employee may be able to raise a grievance to challenge the decision.
Impact of different types of employment contract
Employee rights will be determined in large part by their employment status and the type of contract they have.
In today’s economy, a number of different employment contracts are used. These include full-time and part-time permanent contracts, fixed-term contracts, zero hour contracts and contracts for agency staff, freelancers, consultants and contractors.
Permanent employment contracts apply for example where an individual is employed for regular hours for a salary or hourly rate on an indefinite basis and until such time as the employer or the employee no longer wish the employment to continue. Permanent contracts can apply to full-time or part-time employees. Employees with a permanent contract have full statutory employment rights.
Fixed-term contracts have a set end date or endpoint when the employee and employer have agreed the contract of employment will be terminated. The term can usually be extended by mutual agreement. Fixed-term employees are entitled to the same legal protections and rights as permanent employees and should not be offered less favourable terms due to the fixed-term basis of their employment.
Note also that fixed term contracts of four years or more may be automatically deemed a permanent contract.
Zero hour contracts, also referred to as ‘casual’ contracts, are used where the employer wants to employ the individual but they cannot commit to a minimum or regular number of hours. Zero hour workers still benefit from statutory employment rights including minimum wage, statutory sick pay, where eligible, and statutory minimum notice periods.
Employment contract fundamentals
A contract of employment does not have to be written but it is best practice for all employees to be provided with a written document setting out the terms and conditions of their employment. This helps to provide clarity over the rights and obligations of both the employer and the employee and to avoid misunderstandings that can result in dispute.
In addition to standard terms and conditions, employment contracts should be drafted to ensure optimal protection for the employer, with relevant and appropriate provisions such as flexibility clauses, mobility clauses, restrictive covenants. Taking professional advice to review and draft your contracts will help ensure your interests are protected.
By law, employees with an employment contract of one month or more must be provided with a written statement of particulars at the start of employment. The document should include specific information relating to the employment including, among other details, the employee’s and employer’s names, employment start date, holiday entitlement, place of work and whether there may be a requirement to relocate.
Without a written statement of particulars, should an employment claim arise, the tribunal will decide on the terms to be applied when deciding the case.
Employment contracts can vary by organisation, job type, and employment status of the individual.
As a minimum, a contract should include:
- Employer’s name and contact details
- Employee’s name
- Employment start date
- Job title and description of duties
- Working hours
- Place(s) of work
- Details of pay – amount, frequency
- Details of any continuous employment that will apply
- Holiday entitlement
As well as the principal elements of the contract, the employer will also have to provide information specific to the employment and their duties as an employer. For example:
- Notice period both for employer and employee
- Duration of employment
- Policy on sick leave and pay
- Disciplinary procedures
- Grievance procedures
- Pension scheme arrangements
These do not all have to be in the same document, but if they are separate, it must be made clear to you where to find the most up to date version, for example, in your employee handbook.
DavidsonMorris are business employment law specialists. We have extensive expertise in employment documentation and contracts, including managing processes for change, giving full consideration to the required notice period for changing contract terms and the importance of employee engagement and communication throughout the process.
If you have a question or need advice on any aspect of changing employment contract terms, contact us.
Change of contract terms FAQs
Can an employer change terms of employment contract?
Employers have to act reasonably when making changes to contract terms. Flexibility clauses are included in some employment contracts, which would permit the employer to modify certain terms. Several factors, including as how the clause is worded and the desired variation, will determine whether the employer can rely on this to implement the changes sought.
How much notice do you need to give to change an employment contract?
Employers have to give the employee written notice of at least four weeks to make changes.
Do I have to accept a change to my employment contract?
Depending on the circumstances, an employee may decline to accept a modification or alteration to the terms and circumstances of their employment contract. Employers are advised to discuss any issues and explore alternatives that may result in agreement.
Last updated: 29 August 2022