The terms under which your staff are employed will usually alter during their employment (for example, their pay). Most changes will be uncontroversial, but sometimes you will want to make amendments that the employees are less willing to accept. In such cases, you must ensure that the changes are made legally binding while minimising any possible disruption.

An employer can normally only vary the terms under which an employee is employed with their agreement. However, not all changes during the employment relationship will require the employment contract itself to be amended. Some will be changes in practice rather than to the terms of the contract.

Therefore, when considering making changes to the terms under which one or more of your employees are employed you should consider the following:

Will the proposed changes alter the contract?

You need to look to establish whether the planned changes would involve amending the contract itself. This involves identifying the existing terms of the contract, which may be:

  • Express - These are terms that have been explicitly agreed between the parties. Generally, these are the terms contained in the employees’ contract of employment, together with any variations to those terms and any aspects of the Employee/Staff Handbook which is contractual. 
  • Implied - Terms may be implied for a number of reasons, for example because they are considered to be necessary to give ‘business efficiency’ to the contract or through custom and practice.
  • Incorporated - Terms may be incorporated into the contract by statute or as a result of a collective agreement. 

Some terms will not be part of the contract. These include, for example, ‘policies’ which merely provide guidance on how the contract will be carried out.

Means by which the change can be made

If the term(s) in question are identified as being most likely contractual and as a result the proposed changes are likely to result in a variation to contractual terms, you have the following options:

  • Get express agreement to the new terms from the member of staff. – You are more likely to succeed in doing so if you are able to offer an incentive for acceptance of the change (e.g. gaining one benefit in exchange for foregoing another). The employee’s written agreement ought to be secured. 
  • Variation through a binding collective agreement. – This tends to be particularly helpful where the change affects a number of employees. Note the potential requirement to consult collectively where 20 or more employees at one establishment are affected by significant changes.
  • Unilaterally impose the change and use the employee's conduct to establish implied agreement to the new terms – Notice must be given (in the terms set out in the employees’ contracts of employment) and the intended changes consulted over. Though it may be anticipated that the employee will not sign the statement of acceptance, so long as the proposed change has an immediate effect, if they continue to work without objection, the variation is likely to be affirmed or impliedly accepted by them. 
  • Terminate the existing contract and offer continued employment on the new terms. This tends to be an option of ‘last resort’ due to the risks involved. It should only be carried out where there are sound and substantial business reasons for bringing about the intended variation and will not risk amounting to a breach of Transfer of Undertakings (Protection of Employment) Regulations 2006 or, due to the manner in which they are imposed, the implied term of mutual trust and confidence. Advance notice must be given (in the terms set out in the employees’ contracts of employment), detailed consultation has to be undertaken and a reasonable procedures must be followed. 

Potential result of the method applied:

a) Express agreement:

This is the ideal method for bringing about a variation to a contractual term. By engaging in discussions with staff, and their union representative, at an early stage, there is a better chance of explaining the driving factors behind the intended changes and of achieving an acceptance of them. Copies of any signed individual and/or collective agreement must be placed in each employee’s personnel file.

b) Unilateral imposition of the change:

This may amount to a breach of contract.

The affected employees will have the following options:

  • To comply with the new terms but work ‘under protest’ and make a claim for breach of contract and, if their wages have been reduced, a claim for unlawful deductions from wages. Only the latter claim tends to be pursued (this is known as ‘standing and suing’).
  • If the change is sufficiently fundamental, to resign and bring a claim for unfair constructive dismissal. The employee has to act fast, otherwise they will be regarded as having affirmed the breach, and must resign in response to the breach rather than in response to some other event (e.g. offer of alternative employment). This is a risky move for an employee to take and the rate of success in such claims at Employment Tribunals is low. 
  • If possible (for example, where there is a change in duties or hours), to refuse to work under the new terms. In these cases it is best to meet with the employee to re-iterate the sound business reasons for bringing about the change and to establish whether they have any valid reasons for taking this stance. You should consider giving them extra time to accept the changes, making adjustments to accommodate any valid personal reasons they have for having difficulties in complying with the changes and the possibility of redeployment. If this is not successful, you ought to consider talking disciplinary action.

c) Termination and re-engaging on the new terms:

This approach avoids the risks involved in unilaterally imposing the change on the employee. However, the employee may be able to claim:

  • Wrongful dismissal, if the appropriate period of prior notice of the change has not been given.
  • Unfair dismissal, unless you can establish a potentially fair reason for dismissal and show that you acted reasonably in (arguably) having dismissed the employee. Even if there is a potentially fair reason for dismissing an employee you must still follow an appropriate and fair procedure, which includes giving the employee sufficient information about the reasons for their possible dismissal, the opportunity to state their case and to appeal your decision to impose the changes.

Potential headaches:

Information and consultation obligations:

You may be under an obligation to inform and consult with the appropriate union or employee representatives about the proposed changes where you intend to implement changes in respect of 20 or more employees’ contracts of employment at any one establishment.
Any one of the methods for bringing about a change to terms which are set out above, including through express agreement by employees, can be considered by a Tribunal as having amounted to a dismissal. Failure to comply with the collective consultation obligations may result in a protective award against you requiring you to pay up to 90 days' pay to each of the affected employees.

Changes on or after a TUPE transfer:

Where you are proposing to make changes to the terms on which employees who have transferred to you under Transfer of Undertakings (Protection of Employment) Regulations 2006 any changes that can be shown to be for the sole or principal reason of the transfer are likely to be void unless it is for an economic, technical or organisational reason entailing changes in the workforce (e.g. redundancy).

Discriminatory impact of changes:

Indirect discrimination claims could arise if the proposed changes impact unfairly on a particular employee or group of employees by reason of their age; disability; gender reassignment; marriage and civil partnership; race; religion or belief; sex; and sexual orientation.