Within two months of commencement of employment, an employer is required to provide to an employee a written statement of certain terms and conditions of employment. This statement should contain essential information regarding the employment relationship, including, for example, the employee’s start date, salary details and holiday entitlement. However, an employer’s responsibility does not end there; due to the fluid nature of the employment relationship, an employee’s written terms and conditions of employment must be adapted and updated to ensure the terms and conditions continue to reflect the reality of the working relationship. As a consequence of this, an employer must also confirm in writing to an employee any amendment to the terms and conditions of employment within one month of the amendment taking effect.
In a best case scenario, changes to terms and conditions of employment are for the employee’s benefit, for example, a salary increase or a change of job title due to promotion. These changes will usually come about by way of mutual agreement as it is unlikely that changes of this nature will meet with any resistance from employees.
However, in the current economic climate, the situation may well arise whereby an employer requires to amend an employee’s existing terms and conditions of employment to the detriment of the employee. Examples of this may include salary cuts and a reduction in working hours. An employer may view these steps as viable means of reducing costs and preferable to compulsory redundancies. It could also be viewed by the employer as a temporary measure which will allow it to continue to employ valued members of staff in anticipation of better times when workload again increases.
It is very important that employers are aware of the process to be followed when seeking to amend employees’ existing terms and conditions of employment, particularly where the existing terms do not make provision for such amendments. Although it would be advisable to specifically include in a written contract of employment a general clause allowing for amendments to the contract of employment, there will be limits to the contractual terms which an employer could change and the extent of the change. If the employer is seeking to amend an employee’s salary, given the significant nature of the change, it will be necessary for an employer to make a formal amendment to the written contract of employment.
The options open to an employer when amending terms and conditions of employment are as follows:-
- Seek agreement of the employees to the changes. It is recommended that an employer explains fully to employees the need for the proposed change to the existing terms and conditions of employment to attempt to obtain the employees’ buy-in to the proposal. If the change is accepted, fresh terms and conditions can be issued to the employees for signature. If the change is not accepted, an employer will require to consider the two options outlined below.
- Impose the change and wait to see how employees react. Employees may then accept the change allowing fresh terms and conditions of employment to be issued to them by the employer. However, employees may refuse to accept the change but continue to work under protest for the employer. An employer could then face a protracted grievance process. In addition, where there has been a reduction in wages the employees may raise a claim for breach of contract and also unlawful deduction from wages. Alternatively, if the change is imposed without employee consent, an employee may choose to resign and claim constructive dismissal, alleging that the employer has fundamentally breached their contract of employment, causing them to resign from their position. Where the employee chooses not to resign this may also cause problems for the employer as such situations may result in industrial relation problems and low morale amongst staff.
- Terminate the existing written contracts of employment and offer re-engagement on new terms and conditions of employment. This may be necessary where employees refuse to agree to the proposed change. However, an employer should note that where an employee is dismissed in these circumstances, the employee may have a claim for unfair dismissal. Employers should be aware that there may also be collective consultation obligations. In addition, where employees have not been provided with the correct notice, an employee could also raise a claim for breach of contract. However, depending on the circumstances and subject to the employer following a fair process this can be an effective way of imposing new terms and conditions on the workforce.
As can be seen, the process of changing existing terms and conditions of employment is not straightforward and could give rise to Employment Tribunal claims from employees at a time when the employer is striving to reduce the operating costs of the business.
Obviously, the best way to proceed is to obtain approval of the change. In order to obtain employee buy-in, employees should be informed of the reasoning behind the proposed change and consulted fully on the proposed change. In the event that agreement cannot be reached, it is strongly recommended that legal advice is sought on the particular circumstances requiring the change and on the best process to be followed to implement the change.