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Changing terms of employment: overview

03 October 2017
An employee’s terms and conditions will often change during their employment. For example, they may receive a pay increase or they may go from working full time to part time. Often changes are uncontroversial and are mutually agreed, but sometimes there can be a dispute. In such cases, the employer must know how to make the change legally binding while minimising any possible risks. How to implement change A contract can only be amended in accordance with its terms or with the agreement of all parties. However, not all changes during the employment relationship will require the contract itself to be amended. The employer should first consider whether its plans require amendment to the contract itself. This will involve identifying the existing terms of the contract, which may be:
  • These are terms that have been explicitly agreed between the parties (either orally or in writing).
  • Terms may be implied for a number of reasons, for example through custom and practice.
  • Terms may be incorporated into the contract by statute. For example, the Equality Act 2010 implies an equality clause into all contracts.
Some terms and conditions will not be part of the contract, such as non- contractual benefits or “policies” which provide guidance on how the contract will be carried out. However, sometimes a policy can become contractual through custom and practice. Even if the proposed change will affect existing terms of the contract, the employer will not need to vary the contract if:
  • The existing terms of the contract are sufficiently broad to accommodate the employer’s proposals.
  • There is already an express contractual right for the employer to vary the contract in the way proposed.
  • The contract gives the employer a general power to vary its terms.
However any ambiguity in the terms of the contract will be construed against the employer. Employers are also unlikely to be able to make anything other than reasonable or minor amendments if they have a general flexibility clause. It is therefore important that any clauses regarding the variation of contracts are drafted in the clearest language. If the employer’s proposals do involve amending the existing contract and there is no existing contractual right permitting the change, the employer usually has three options:
  • Obtain express agreement to the new terms from the employee or through a collective agreement. Ideally this should be recorded in writing to avoid challenge at a later date.
  • Unilaterally impose the change and use the employee’s conduct to establish implied agreement to the new terms. This however is a risky strategy in certain scenarios and may lead to a claim.
  • Terminate the existing contract and offer continued employment on the new terms. Again this is risky and may result in unfair dismissal claims being made. It is therefore important to show a sound business reason for the change being made before taking this option.
If you would like further guidance on employment contracts, please do not hesitate to contact us.

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