Changing Employment Terms

The Employment Relationship

In any employment relationship it is likely that the exact terms will vary over time. Typical and regular changes include any annual pay rises that may occur or any seasonal adjustments that happen in certain sectors. Whilst it is clearly important for the employment relationship to be founded on certainty and stability it is also necessary to ensure that the employment relationship has a degree of flexibility to allow both employers and employees the opportunity to change the terms where there is a need from either side.

Generally speaking there is a need to gain mutual consent when it comes to any form of change in the employment contract, although this is not always the case as will be discussed later. Statute also steps in to prevent certain changes or to ensure that fair processes are followed when such changes are likely to occur.

Types of Contractual Provision

Before determining how a contractual provision can be altered it is worth considering the different types of provisions that exist in the first place. The first type of provision and arguably the most easily recognised is that of an express term. These are expressly laid out and stated in the employment contract either orally or in writing. Note that an express term does not have to necessarily have to be part of a written employment contract and could be something that is expressly stated during an oral conversation i.e. during the recruitment process. Implied terms are ones that have not been expressly stated but are recognised to exist by virtue of the fact that both parties seem to believe they exist and have acted in a way that recognises this belief.

Changing the terms depends on whether they are seen as contractual provisions (either express or implied) or non-contractual provisions.

Changes Under the Contract

Contractual provisions are those that are considered fundamental to the relationship and will normally be expressly written out in the contract or written statement. These terms include issues such as hours, job title, pay etc and are deemed critical to the relationship. It is necessary to gain mutual consent in order to alter these terms and provisions.

Where a contractual term is going to be changed it is necessary for both parties to agree these changes. If the change is something beneficial such as a pay increase it is unlikely that there will be any objections at all, however slightly more contentious issues such as changing working hours or working patterns may produce a greater practical difficulty. Where matters cannot be mutually agreed it may be necessary to consider whether the original role has become redundant or whether there needs to be a wider look at the entire working practices of the team members.

Changes not under the Contract

Where the provisions are part of the handbook and are not viewed as contractual altering them is a slightly easier process. It should be noted that whilst terms and conditions that are in the handbooks will normally not be contractual terms it is possible for them to be considered so important that they are deemed to be contractual provisions that can only be changed with mutual agreement despite the fact that they are not strictly part of the contract. This typically happens whenever there is a term in the handbook that is so fundamental to the relationship that it must be given the same level of importance as a contractual term.

Where the term is merely part of the handbook and is not a contractual term (a common example of that is where there is a bonus structure in place) this can be changed by the employer without the consent of the employee. Despite no consent being necessary most employers will attempt to gain acceptance from employees as a matter of good practise. There are also certain changes which are protected by statute for example in relation to pensions or working hours and these cannot be altered by employers regardless of approval being obtained by employees.

Other Legal Issues to Consider

Information and Consulting

One of the ways that a contract may be amended is by entering into a collective discussion with the workforce. Where a collective agreement is made all contracts can then be changed even if one of the individual employees does not necessarily agree with the change.

Secondly where the terms need to change but it is impossible to gain agreement it may be necessary for a consultation to be entered into pending a possible redundancy situation. For example it may be that the company no longer has full time work available and is looking to make full time employees redundant and to recruit part time workers.

Statement of Terms

Whenever a new employee is taken on it is necessary for the employer to give a written statement (commonly referred to as a section 1 statement) detailing the basics of the employment relationship. This must be done within two months of the employee starting their job.

In a similar way when there is a change of terms a section 4 statements must be issued to the employee detailing these changes.

Practical Tips

  • Ensure that all terms and conditions of employment are laid out clearly from the outset, either in the contract or handbook.
  • Consider the nature of the changes that you are looking at implementing.
  • Consult and gain approval where necessary.
  • Consider alternatives such as redundancy and collective agreements if co-operation is not forthcoming, but ensure that this is for a legitimate business purpose.