Guide

Change an employee's terms of employment

Failure to agree to employment contract changes

Sometimes, despite negotiation, you may not be able to reach agreement with an employee over changes to a contract.

But if you impose changes without agreement, there will be a breach of contract.

As noted in the previous page, if the breach of contract is a fundamental one - for instance, if it involves a significant change in pay or working hours - an employee could resign and regard themselves as having been given no other choice than to do so ('constructively dismissed'). If they have one year or more of continuous employment with you, they will be able to claim unfair constructive dismissal in an industrial tribunal.

If the breach of contract has caused them a measurable financial loss, employees can also sue for damages, either in industrial tribunals or in the ordinary courts.

Claims and awards

Industrial tribunal claims must normally be made within three months of the employment ending but civil court claims may be made up to six years from the breach of contract.

Awards for damages in industrial tribunals are limited to £25,000 but there is no limit in the ordinary courts.

If employees are unable to seek damages because they have not suffered financial loss, the court may require the employer to abide by the original contract.

Contracts

You can consider terminating the original contract (dismissing the employee), provided you give the required notice. You should provide the minimum statutory notice period, or the notice specified in the employment contract, whichever is longer. See how to issue the correct periods of notice.

You can offer a new, revised contract to the dismissed employee. If the employee believes the dismissal was unfair, and they have one year or more of continuous employment with you, they may complain to an industrial tribunal. It would be up to the tribunal to decide whether the dismissal was fair or unfair.

The offer of a new contract could reduce the amount of a tribunal award because the employee's financial loss has been lessened by accepting the revised terms or because potentially - by rejecting the offer - they have not complied with their duty to lessen the loss. However, it would be sensible to consider seeking legal advice prior to any potential contract change.

You may have to follow collective redundancy consultation procedures, even when no reduction of the workforce is planned, if you intend to impose new terms and conditions on 20 or more employees by terminating their existing contracts. Read more on the redundancy consultation process.