Changing employment terms?

As your business develops you may consider changing your employment terms to take account of changing roles, customer needs, working conditions or salary for example. We advise you to go about this in a structured way, explaining your rationale and communicating and engaging with your employees to ensure that they feel they have had a chance to contribute to the nature of the change and how it is applied. If you approach change in a positive manner, you are more likely to gain agreement to a change and, even if the change is not a popular one, avoid unnecessary conflict and potentially a legal challenge.

By law, every employee in the UK has an employment contract. Contractual terms may be written or implied including what is considered to be “custom and practice” i.e. how things actually happen. It does not matter if it is not in writing or was not even discussed.

An employer can make a change (‘variation’) to an employment contract if:

  • there’s something in the contract that allows the change
  • the employee agrees to the change
  • the employee’s representatives agree to the change (for example, a trade union)
  • An employer can force a new contract on employees, by dismissing with notice and e-engaging the employee on the new terms and conditions without a break in service, although this should be a last resort and could lead to legal action.

Generally, where a right to make, changes are referred to in the contract, the change can only be minor or reasonable in nature. To make significant changes such as reducing pay, changing hours, or changing the place of work, you will need to consult. Where you formally recognise trade unions or a staff association by way of a collective agreement, you will also need to consult with staff representatives before you start to consult with individual employees.

You should ensure that you are aware of historical agreements with your employees. If an employee was transferred into your business under specific terms and conditions (TUPE) you will need to understand the implications of the proposed change as the employees’ terms and conditions may still be protected in law.

It is important to be clear about your reasons for making the change. What is driving the change? What will the change achieve? What will happen if the change is not made? Think about how you can go about communicating the change in a positive way, considering mitigation for the change if it is contentious and explaining to employees how they can be involved and suggest alternatives. Mitigation does not have to be pay-related, for example, appropriate mitigation might be extra leave or help with travel costs for a time if employees will have to travel further to get to work.

Once your consultation has concluded and your final solution has been determined you will need to write to the affected employees within a month to tell them exactly what has changed and where they can find information about the change.

Imposing change without reasonable efforts to seek agreement can lead to conflict, loss of great employees, falling morale and productivity and/or a claim resulting in damages for loss because of your breach of contract. In some situations, the change could be construed as constructive or unfair dismissal and/or direct or indirect discrimination if you have not fully considered the impacts of your proposed change.

It is better and less stressful to have good employment contracts backed by a suitable employee handbook so that everyone is clear from the start. This is what HR Wise offers.

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