“How do I go about changing my employees’ terms and conditions?”

Circumstances in any organisation can change over time and it may be that at some stage an employer finds that the terms and conditions of some or all of the employees no longer best serve the requirements of the organisation.

Perhaps the most obvious example of varying terms and conditions relates to employees’ remuneration. In recent times many organisations have had to go through the difficult process of implementing pay cuts or withdrawing certain employee benefits. Another common scenario is where the employer wishes to vary the business opening hours to respond to customer demand and this requires a change to employees’ working hours.

As the employment relationship is a legally binding contract entered into by two parties, it is not usually open to one party to vary the terms of the contract without the consent of the other. So how does an employer go about varying employees’ terms and conditions when the business needs require such a change?

If the employer simply tries to amend the terms of the contract without the employee’s consent, the employer is at risk of the employee suing for breach of contract or even resigning and claiming that the employer’s conduct in varying the contract amounted to the employee being constructively dismissed.

The process of varying terms of employment should start with consulting with the affected employees with a view to obtaining consent to the proposed change. It is important that the employer explains the reason why the change is proposed. Employees are much more likely to consent to a change in their terms and conditions if they understand why the change has to be made. For instance, if an employer is proposing a pay cut because of economic difficulties the organisation is facing, employees may well consent to the reduction in pay if they understand that the reduction in pay is necessary to safeguard the viability of the business and is being proposed in an effort to avoid redundancies.

If consent to the proposed change can be secured, then the employer should record the agreed variation in writing, have it signed by the employee and attach the statement of variation and the employee’s consent as an appendix to the employee’s statement of main terms of employment.

If, after consultation, agreement cannot be reached with employees regarding a variation in the terms and conditions of employment, the employer may consider serving notice to terminate the existing contract of employment and offering to re-engage the employee on new terms and conditions. Employers should note that the statutory dismissal procedure should be followed throughout the process of terminating the existing contract of employment, including offering the right of appeal against the decision. If an employee refuses to accept the new terms and conditions offered, the employee will leave the organisation as they will have been dismissed by the employer. The dismissal will be fair only if the employer can show that it had a substantial business reason for terminating the contract. This procedure of dismissal and offering to re-engage should be considered only as a last resort where it has not been possible to secure consent to the proposed change. An employer should certainly seek legal advice before embarking upon this process.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.