Change an employee's terms of employment
You may wish to change an employee's agreed contract of employment because your business has changed - for example, through economic circumstances. Areas you may want to change can include pay, hours worked, different duties or a new workplace.
Sometimes an employee may wish to change the contract, perhaps to get better pay or working conditions, or to switch to part-time working.
Before altering any of your employees' contracts it is important to check exactly what is in the original documents and consult as far as possible with your employees. You should also put any agreed changes in writing to the employee within one month. It is a legal requirement that you do this where the change concerns any of the items that must be contained within the written statement.
Employees of companies with 50 or more employees have the right to request to be informed and consulted about the business they work for under the Information and Consultation of Employees Regulations. In addition, if your business is part of a multinational company, your employees may have the right to be informed and consulted about transnational issues affecting your company.
This guide gives advice on how to manage changes with your staff and outlines your legal obligations.
Checking the existing employment contract before making changes
Before you think about altering any staff contracts, make sure you know exactly what is in the original. Every employee has a contract as soon as they start working for you, even if it has never been written down.
In addition, employees who work for you for a month or more must be given a written statement of main employment particulars within two months of joining. It is not itself a contract, but it can provide evidence of the contract's terms if there is a dispute. Read more on the written statement.
A contract contains both express and implied terms.
Express terms are those which are explicitly agreed between employer and employee, either in writing or orally.
They will be made clear in any letter of appointment or written or oral statement made by the employer and accepted by the employee. Express terms may also be written into an individual contract based on other documents such as collective agreements and company handbooks.
Implied terms are not spelt out in a contract in some cases, because they are considered too obvious to mention. For example, if you offer someone a job, it is implied that they will not steal from the company. Another implied term is that the employer will provide a safe working environment.
Consulting employees about changes to their terms of employment
Some contracts may contain terms that allow employers to make changes in working conditions. These should be reasonable, for example performing additional tasks to reflect seasonal fluctuations in demand. Do not rely on such terms to make more fundamental changes because your employee may then claim the contract has been breached and may make various legal claims against you.
If you impose changes without agreement, there will be a breach of contract. If the breach is a fundamental one eg a significant change in pay, an employee could resign and regard themselves as having been given no other choice but to do so. If they have more than one year of continuous employment with you, they can claim unfair constructive dismissal in an industrial tribunal. Damages for financial loss, for example, may also be sought in the civil courts if they have under a years' continuous service with you.
If you want to change terms or conditions in a collective agreement with a trade union that you formally recognise, you should always consult with the Trade Union to reach agreement.
Consultation should be detailed and undertaken with a view to reaching agreement and you should fully explain the reasons for any changes.
The Information and Consultation of Employees (ICE) Regulations give employees in companies with 50 or more employees the right to request to be informed and consulted about significant developments in the workplace. If 10 per cent or more of employees (subject to a minimum of 15 and a maximum of 2,500) make a valid request, businesses are required to negotiate a procedure for informing and consulting with employees.
The Transnational Information and Consultation of Employees (TICE) Regulations give employees in multinational companies the right to be represented on a European Works Council (EWC).
EWCs are designed to allow employees in different EU member states to be informed and consulted on transnational issues affecting the company. If your business has 1,000 or more employees and at least 150 employees in each of two or more member states, your employees have the right to request an EWC.
See how to inform and consult your employees.
Consultation can take place on a one-to-one basis or in the form of group briefings. Whichever method you choose, you should provide an opportunity for employees to ask questions. Be prepared to answer these questions and ensure employees have the relevant information they need to prepare for the meeting. Always consider an individual's particular circumstances.
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.
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.
Checklist: changing an employee's terms of employment
You may want to change an employee's contract of employment for a number of reasons. Often the nature of your business has changed, perhaps through expansion, a change in economic circumstances or a reorganisation.
Make sure you:
Familiarise yourself thoroughly with the details of any existing contracts before considering what alterations you want to make.
Consult your staff about any changes you wish to introduce and include their trade union or other elected representatives. Simply imposing changes could mean a claim by employees for damages in a civil court, industrial tribunal, or a constructive dismissal claim before an industrial tribunal.
Discuss any changes with your staff in a thorough and detailed way, fully explaining the reasons for any planned alteration and take into consideration the impact of the proposed changes in individual circumstances. Agreed changes should be confirmed in writing to the employee within one month.
Try, if agreement cannot be reached with an employee on changes, to negotiate a new contract.
Document as much in writing as possible.
Do not assume an employee's acceptance of changes imposed without agreement. An employee may accept the breach of contract, treat the breach as a termination of the contract and bring a claim for constructive dismissal or continue working under protest making it clear that the change is being treated as a breach of contract. An employee may complain to an industrial tribunal within three months of the change being imposed. The employee would have to resign and not wait too long before doing so, otherwise it could be taken as affirmation of the breach.
Breach of contract cases can only be taken to the industrial tribunal if the employment has terminated and the claim arises on termination of employment.
If the employee continues to work under protest, they may have to sue in a civil court unless the breach results in loss which can be pursued through the Employment Rights (Northern Ireland) Order 1996 part 4 Protection of Wages as an unlawful deduction from wages claim. Such claims would be made to the Industrial Tribunal.
Advantages and disadvantages of harmonising terms of employment
In order to reduce or eliminate differences between categories of employees, such as manual and non-manual workers, you should consider harmonising terms and conditions of employment across your business.
Harmonisation is more likely to lead to an improvement in terms and conditions rather than reducing them.
This will not only make your pay and benefits seem fairer to your staff but also help to ensure your pay and benefits system is not unlawfully discriminatory.
If you intend to use harmonisation to reduce any benefit or entitlement, it is important that this change is agreed prior to implementation and that the previous guidance on varying a contract of employment is followed.
What terms and conditions of employment can be harmonised?
There are different terms and conditions of employment where harmonisation can be used to benefit your business, such as:
- notice periods
- hours of work
- shift premiums
- canteen facilities
- sick pay schemes
- redundancy terms
- lay offs and short-time working
- holiday entitlements and holiday pay
- payment systems and methods of payment
- time-recording procedures, eg clocking on and off
- fringe benefits, eg health insurance and company cars
Advantages of harmonisation
The benefits of harmonisation will vary from business to business, but may include:
- improved productivity
- more efficient administration
- improved recruitment and retention of employees
- better relationships between different grades of staff
Disadvantages of harmonisation
You may encounter certain problems when introducing harmonisation to your business, such as:
- increased wages bill and pension scheme contributions
- manager and employee resistance to changes to their status or working conditions, especially if they feel they won't personally benefit
- employee management problems if traditional controls are removed, such as clocking on and off
Harmonisation following the transfer of employees into your business
If you buy another business, the rights of any employees who transfer as part of the purchase are protected under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). Employees who transfer to your business do so with their pre-existing terms and conditions intact.
You must not change transferred employees' terms and conditions simply to harmonise them with those of your existing staff.
For more information, see responsibilities to employees if you buy or sell a business.
For harmonisation to succeed in your business, senior managers must be committed. Involve managers, employees and - if applicable - workplace representatives both before you finalise any harmonisation programme and during its introduction.
Work out the costs and possible benefits of harmonisation and consider whether any of the costs will be offset by changes in working practices.
You will also need to:
- set a realistic timescale for the introduction of harmonisation
- carry out any necessary training
- monitor and maintain the changes