Changing employment terms

Terms of employment relationships may need to vary over time – for example, the employer may wish to change pay structures to reflect economic conditions or an employee may want to change their working hours. So, while it’s important for the employment relationship to be founded on certainty, flexibility is required to allow both employers and employees to change the terms where needed.

Mutual consent is generally required before changes can be made to the employment contract. Statute also prevents certain changes and ensures fair processes are followed when such changes are likely to occur.

Types of contractual provision

Contractual terms can be:

express – these are terms explicitly agreed between the employer and employee, whether in writing or orally. They may be incorporated into the employment contract through the written statement of terms and conditions, the letter of appointment or oral agreements between the parties;

implied – these term may have not been expressly stated but are assumed to exist by both parties, are necessary to make the contract workable, or are adopted because of the nature of the customs and practices of the business or industry involved;

statutory – these are imposed or implied through Acts of Parliament or statutory instruments, eg, entitlement to the national minimum wage or the right to be given a minimum period of notice. Any attempted agreement to contract out of such statutory terms are generally void in law.

Changes under the contract

Contractual terms are those considered fundamental to the relationship and will normally be expressly written out in the contract. These terms include issues such as hours, job title, pay, etc.

To change a contractual term both parties must agree to the changes. If the change is something beneficial such as a pay increase, objections are unlikely. However, more contentious issues such as changing working hours or patterns may be more difficult.

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 slightly easier. While terms and conditions in the handbooks will normally not be contractual terms, it is possible for them to be considered so important that they are deemed contractual provisions that can only be changed with mutual agreement. 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 (eg, where a bonus structure is in place) this can be changed by the employer without the consent of the employee. Despite no consent being necessary, most employers will try 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 issues

Information and consulting

contract may be amended 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.

Where the terms need to change but it is impossible to gain agreement, it may be necessary to conduct a redundancy consultation. For example, it may be 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 under the Employment Rights Act 1996 for the employer to give a written statement detailing the basics of the employment relationship. This must be done within two months of the employee starting their job.

Similarly, when there is a change of terms, a statement must be issued to the employee detailing these changes.

Practical tips

  • Ensure 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 this is for a legitimate business purpose.