There may be circumstances in which you want to change the terms of your employment contracts; for example to cut pay and benefits in times of financial difficulty or change the location of your workplace. In most situations, this will be easy to do if the staff member agrees and provided you follow the right process. However, if your staff member doesn’t consent to the change, and you can’t rely on a ‘flexibility’ or ‘mobility’ clause in their contract, their employment contract can’t be changed. This blog discusses when an employment contract can be changed and whether this needs to be documented in writing.
Bear in mind that you can’t change an employment contract to avoid complying with employees’ minimum legal rights (eg relating to core hours, sick pay and holiday pay). If the employee in question has been transferred to your business under the TUPE regime there will also be a number of restrictions on what you are able to do.
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Do I have to make changes to an employment contract in writing?
Yes. If you are changing the core terms of work for either employees or casual workers, you are legally required to confirm the changes in writing as soon as possible and within a month in any event. Core terms include place of work, working hours, salary or wages, job title, holiday or sick pay, pensions, parental leave and other benefits, notice period and more. See our Q&A for a full list. If you are making a change to your employee’s contract that doesn’t affect a core term, it’s still good practice to confirm this in writing.
Note that an employment contract can only be changed with your employee’s consent, or by relying on a ‘flexibility’ or ‘mobility’ clause. We discuss this further below.
Any promotion or pay rise will amount to a change to a staff member’s job title, description or pay and must be recorded in writing. You must also update the contracts of all employees and casual workers who are entitled to the national minimum wage or the national living wage, whenever the threshold changes (every April) or when a staff member moves into another bracket.
How an employment contract can be changed
The best way of changing the terms of any employment contract is to get the relevant employee or employees to agree to the change. If they don’t agree, you may be able to rely on mobility or flexibility clauses in their contract to make changes without consent, but there are restrictions on how you can use these clauses, and it is important to act reasonably and fairly if you’re relying on these clauses.
Getting an employee’s consent to the change
Consulting with all affected employees to explain the reasons behind changes to their employment contracts and reach an agreement will help to ensure the process is fair. It will also reduce the risk of staff bringing a legal challenge against your business. It’s best practice to explain why you are making the change in the first place, give employees the chance to voice their opinions, and offer assistance to help employees adapt.
You may also decide to offer incentives to those who agree, such as temporarily paying towards relocation or commuting costs where you change their place of work, or offering more flexible working arrangements in return for an increase in working hours. For further guidance on the consultation process, see our Q&A.
Relying on a flexibility or mobility clause
‘Flexibility’ or ‘mobility’ clauses can be included in employment contracts to give you the right to make certain changes without the employee’s agreement. Depending on the wording of the contract, you may be able to make considerable changes while relying on such a clause or you may only be permitted to change a specific term, for example an employee’s place of work.
It’s not always possible to rely on a flexibility or variation clause. The law imposes some restrictions and you should be cautious especially if the changes you are proposing to make are significant. If you want to make a change under a flexibility clause, the wording of the clause must clearly give you the right to make the proposed change. If there is uncertainty, the wording will be interpreted in favour of your employees. Your use of the clause must also be reasonable (for example, by giving reasonable notice of the change). For full guidance, see our Q&A.
You must also be careful not to discriminate against certain groups who may be more impacted by the change than others. For example, women generally take on more childcare responsibilities so increasing working hours could pose problems. Consulting in advance can avoid dissatisfaction and smoothen the process.
The procedure for changing employees’ contracts
There is a set procedure to follow to change employees’ contracts. Note that this will differ for agency workers, freelancers and casual workers.
The first step is to provide your employees with information about why the change is required, when the change will be implemented and what alternatives have been considered. A private or group meeting may be an appropriate way of doing this but should be followed by information in writing. Clearly, if you are cutting pay or benefits, getting staff to agree may be more difficult. Once you do obtain their agreement, you should document this formally.
You may find the following templates helpful:
- to request consent, Letter to staff member amending contract;
- to confirm a pay increase, Letter to staff member confirming pay increase;
- to confirm change to place of work, Letter to staff member confirming change of work location; and
- to confirm promotion, Letter to staff member confirming promotion.
If a change is sufficiently minor, and does not affect a core term, it may be enough to simply update your staff handbook if you have one (see our staff handbook template).
Also note that if staff have come to work for you because of a service provision change or business transfer, extra care is needed. Because of added protections under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), you cannot simply change the contracts of transferring employees to align with the contracts of your existing staff. For more detail see our Q&A on TUPE transfers.
What happens if a staff member won’t agree to a change
If your staff member won’t agree to a change, and you can’t rely on a flexibility or mobility clause, an alternative to changing the existing terms in a contract is to dismiss an employee and re-hire them on the new contract terms. However, this should be generally a last resort as it can damage your employment relationship with your staff and increases the risk of employees bringing claims against you.
The Government recently announced a crackdown on these type of ‘fire and rehire’ actions and is planning to introduce a statutory code of practice making it clear to employers that they must not threaten employees with dismissal in order to pressure them into accepting new terms. Employers should have honest and open-minded discussions with their employees and representatives and try to negotiate fairly to come to an acceptable arrangement to all.
You can find out more about best practice for how to change employment contracts and consult with employees in our Q&A.
The content in this article is up to date at the date of publishing. The information provided is intended only for information purposes, and is not for the purpose of providing legal advice. Sparqa Legal’s Terms of Use apply.
Marion joined Sparqa Legal as a Senior Legal Editor in 2018. She previously worked as a corporate/commercial lawyer for five years at one of New Zealand’s leading law firms, Kensington Swan (now Dentons Kensington Swan), and as an in-house legal consultant for a UK tech company. Marion regularly writes for Sparqa’s blog, contributing across its commercial, IP and health and safety law content.