An employment contract is between an employer and employee, which sets out the key terms and conditions. Either party can propose contract amendments but both have to agree on the changes.
Contracts are usually agreed in writing, which make the terms of employment contracts legally binding, and protects both parties if legal disputes or changes to contracts arise.
Moreover, some employers may not provide a written contract and only confirm the terms verbally. However, working without a written statement or contract carries a risk, particularly when it comes to making changes as there is no evidence of the agreed terms.
How can employment changes be agreed?
Under Advisory, Conciliation and Arbitration Service (Acas) there are different ways the changes to employment contracts can be agreed, such as:
- An employer can propose a change, but it must be agreed by the employee(s) before it is implemented.
- One or more employees suggest a change, which the employer can discuss and agree to.
- A 'collective agreement' is between a trade union and employee(s). The union agrees to changes on behalf of the employee(s), such as increases in salary.
Can employers make changes to contract terms?
Typically employers can not legally change contract terms without prior consent from the receiving party (the employee). However, if they provide notice and clarify the reasoning and implications they may be able to make changes to contract terms.
Occasionally employers may need to make amendments in order to solve an internal issue or align contracts across the business. These changes are referred to as a 'variation of contract'.
Some examples of these changes may be:
- to introduce or modify terms and conditions, for example contractual pay range, leave entitlement, contractual maternity and paternity leave, or updates to pension schemes, etc
- to ensure contracts are up to date with new laws or regulations
- to reflect organisational changes, such as different management
- to introduce company changes such as different working hours
- to update a job role and responsibilities
- to confirm a notice or probation period
- to notify of alterations to benefits
It is important for employees to read their contracts as some may contain certain clauses, for example, a ‘flexible clause.' These are also called variation clauses, and are used to give an employer permission to alter specific terms of employment.
However, this only allows employers to make reasonable changes and give suitable notice under this clause. This will be discussed with employee(s) and negotiated, where necessary.
Contractual rights during business transfers
If there is a business transfer, merge, or a service provision change the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply.
Under the TUPE regulations, an employer cannot change a contract term if it is directly related to the business transfer.
This regulation helps to protect the contractual rights of employees even when they are transferred to a different company.
Employees can seek legal advice for more information on their rights, or if they believe their employer has breached their contract.
Does the employee need to be consulted before making changes?
It is a legal requirement for an employer to consult an employee about any possible changes to their contract and clearly explain:
- the effect of any change
- who is affected i.e. how many employees
- when the change will be implemented, and provide notice before this happens
If the employee(s) agrees to the proposed amendments, employers will usually provide a written statement to the affected employee(s).
Employers must give up to a months' notice of any changes that relate to the employee's contract or main terms and conditions, such as contracted working hours, minimum wage, or job location.
Union acceptance on behalf of employees
If employees are part of a trade union, any negotiations to change contract terms may be communicated to the union. Representatives of the recognised trade union, will agree to any changes to terms and conditions on behalf of the employee(s).
What happens if the employee does not accept the change?
An employee can refuse the change to the terms if it does not meet their expectations or seems conflicting to the previous terms and conditions.
However, if the change is deemed a breach of contract or the two parties cannot reach a reasonable agreement, employees may take legal action against the employer or file a case to an Employment Tribunal.
No prior consent
If an employer does not provide sufficient notice, an employee may also have certain grounds for a legal claim, such as:
- a breach of their written contract
- unlawful decrease in salary
- unlawful discrimination
Employees can seek support via the Acas website, or a trade union representative, if they have one.
Consequences of legal action
Legal disputes of this nature can result in:
- damaged working relations between employers and employee(s)
- cause reputation damage to the organisation
- one or more employees leaving the business
- strike or industrial action if there is a trade union
- discrimination claim if the changes go against the Equality Act 2010
Employers should work to find a suitable solution, and negotiate terms with the employee(s) or trade unions beforehand.
Can employees make changes to contract terms?
Employees have the option of requesting changes to their employment contracts, however the employer has to accept them.
In some cases, employees may suggest an amendment to their contract of employment, such as:
- if their job role does not appear to match their job title
- if they want to ask for different terms and conditions, such as a pay rise or extra holiday
- if they request different working hours (such as a flexible working request) or changes that are specific to their location
This can also involve negotiations with the aim of reaching a mutual agreement which the parties can agree before the change comes into effect.
An employer does not necessarily have to agree with the change, but should work to listen, understand and consider their proposals of employee(s). It is important that an employer tries to find a suitable solution.
Having an employment contract in place is important to protect both the employer and employees. With Legislate, employers can tailor lawyer approved agreements and extract relevant data to provide useful insights. Legislate streamlines the employment contract process for all parties involved. Book a demo with one of our representatives or sign up today.
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.