Employment contracts: how to vary them

Businesses should treat variations of contractual terms cautiously as some changes may be a fundamental breach of contract that would allow an employee to resign and pursue an employment tribunal claim.

Varying contractual terms generally requires the employee’s agreement; there are some aspects that can be changed without the agreement of the employee such as non-contractual policies.

Some employment contracts include an express term which states that a particular term is variable by the employer; but it does not give an employer carte blanche to significantly vary contractual terms to the employee’s detriment without their agreement.

Employers wanting to alter existing employment contracts with employees have the following options:

  1. Consultation – agree changes with employees after a thorough consultation process; this may include a financial incentive to accept the changes or making the changes to be overall not financially worse off afterwards than before.
  2. Unilateral changes – happen when there is a pressing business need to impose the changes unilaterally with immediate effect or prompt; with the employer assuming acceptance of the changes if the employee continues to work without objection.
  3. Terminate and re-engage – the employer gives notice to end the current employment contract and offers to re-engage on new terms and conditions with immediate effect.

Options B and C carry risks; an employee could choose to continue to work but do so under protest and bring an employment tribunal claim for breach of contract, or worse they could resign and claim constructive unfair dismissal and/or wrongful dismissal.

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