Varying contracts of employment

There are many reasons why a business would seek to vary the terms of someone’s contract of employment.

Perhaps a business is relocating and so the place of work clause needs amending, or perhaps an individual has taken on a more senior role that comes with it a new job description and new post-termination restrictive covenants.

However, in the current economic times, the most likely changes that an organisation would be seeking are:

• reduction in rates of pay
• reduction in hours
• agreement to unpaid leave (or “lay off”)
• change to the standard hour pattern, perhaps because of safety concerns, or in order to bring staff back utilising the “flexible furlough” scheme.

It is important not to simply alter the terms of a contract of employment without discussing it with the employee, even if your contract states that variations can be made to it. Whilst this clause may assist with defending a breach of contract claim, acting in this way could still breach the implied term of mutual trust and confidence and potentially give rise to a claim for constructive unfair dismissal.

The first thing to seek is the individual’s consent to the change. This will be easier in certain situations than in others; most notably it is easier when the individual is benefitting from the change. Where the change disadvantages the individual, the sales pitch is more difficult. It is often best to try to have these conversations in person, as well as putting the detail in writing for the individual to consider, as it can help you explain exactly why the change is being requested and staves off an “us vs them” view.

When making a change to the contract that is potentially negative to the employee, it is important to be prepared. If you are seeking to instigate a pay cut, for example, you will know that the individual is likely to be upset about this and will not want to accept it willingly. If you as the HR or line manager can be prepared with all the relevant information (such as, how long the variation is required for, why it is required, what else is being done to avoid the cuts going on for a longer period of time) you will be able to “sell” the change request more effectively. Having your managers on side is also going to be important to try and get the change implemented. They are the ones that are going to be faced with questions.

Be aware that these topics could potentially be emotive and expect your employees and workers to go through the change curve in terms of their emotions. Be reasonable and listen to their individual concerns. It may be possible, depending on the change you are looking to implement and the timeframe, to survey your employees to see if they have any suggestions early on in the process. The more involved they are the more likely you are to gain any buy-in.

If the individual will not consent to the change to the contract, there is a decision to be made. The individual’s right is to continue with their contract under the terms they had before, and it may be that the business decides it can take that approach. However, if there is a genuine need to make the change and the organisation can demonstrate the business case in doing so, it would be time to move towards a “dismissal and re-engagement” process. This involves consultation meetings with the dissenting employees, initially at first still with the intention of getting their consent. It may be that as part of this that other options can be considered too. During this process, the employee should be notified that dismissal is a possible outcome if agreement cannot be reached, and the usual considerations under the ACAS Code apply. Ultimately, if there is no agreement and the variation is the only option, then the business can, having a sound reason and having followed a thorough process, dismiss on notice and offer re-engagement (if they wish) on the new terms. This would be a dismissal and so it is important to do it correctly to avoid the risk of a claim for unfair dismissal following.

It is important to be mindful of the numbers affected in such a process – if there is a chance you may end up dismissing and re-engaging 20 or more in a 90 day period then collective consultation obligations will be invoked.

Finally, always remain mindful of the terms of any collective agreement that you may have in place and whether any Union negotiation is required.

Further advice

Varying contracts of employment can be a complex exercise, and whilst it is very important to take the right measures in law there are also clear tactics that can be deployed to assist from an HR perspective.

For more advice and assistance with varying contracts of employment in your organisation, please sign up to our online training session on this topic, on 9 June 2020 at 11am.

If you have any questions about varying your employees’ contracts of employment, please get in touch with our specialist Employment Law team through this website or by calling 0330 404 0778.

Our partners at Ashtons HR Consulting are also on hand to assist you.

Nothing in this note should be construed as specific legal advice.

This information is correct at 10.45am on 4 June 2020.