Varying an employment contract

Varying existing contractual terms normally requires agreement.

Although some minor matters can be changed without the employee’s agreement, most aspects cannot. Examples of things that can be changed include non-contractual policies where these have been carefully drafted to ensure there is no binding contractual effect.

Organisations should be cautious about trying to vary contractual terms. If changes are a fundamental breach of contract employees can resign and bring a tribunal claim.

Some employment contracts include an express term which states that a particular term is variable by the employer. Such clauses may encourage employees to assume that the changes are permissible, but even an express clause will not guarantee that the employer can significantly vary contractual terms to the employee’s detriment without agreement.

Employers who wish to alter existing contractual terms have three main options:

1.Agree the changes with the employee after thorough consultation. A small incentive may be offered to encourage acceptance. This is the safest course of action.

2.Make changes unilaterally. Even where there is a pressing business need to impose the changes, this may be risky. In some circumstances the employer may assume acceptance if the employee continues to work without objection. However, the employee may choose to continue to work, but do so under protest and bring an action for breach of contract. Alternatively, the employee may resign and bring a claim for constructive unfair dismissal and/or wrongful dismissal. 

3.Terminate the employee’s contract by notice and offer them re-engagement on new terms and conditions. An employer may consider this option where changes cannot be agreed and where it appears too risky to impose the changes unilaterally. The employer must then offer re-engagement on the new terms immediately. Employers should be aware that in legal terms this may be considered a redundancy dismissal, so they should follow any rules around collective redundancy and consultation time limits. This course of action is not without risk: the employee may claim breach of contract or unfair dismissal, although any compensation will be limited as the employer is offering re-engagement.  

Any variations should be confirmed in writing within one month of the changes taking place.

Additional points to consider

• Changes following a transfer of undertakings can only be made for a economic, technical or organisational reason if connected to the transfer, not merely to harmonise terms across the workforce.
• While there is no legal requirement for employees to sign their written statement, it makes it easier for an employer to rely on any clauses if they've done so.
• Where employers wish clauses to be non-contractual, they should state this clearly when inserting them to ensure they cannot be relied on as implied by custom and practice.
• Certain clauses such as mobility clauses or restrictive covenants need to be drawn up with particular care to ensure they can be relied on in the future.
• Employees’ requests to change their terms and conditions must at least be considered, especially for employees who have worked for the same employer for at least 26 weeks as the flexible working legislation requires this.
• There may be an increased focus on employers’ attempts to vary existing contractual terms as they try to carry on trading following the coronavirus related impact on business.