An Employer’s Guide to Employment Contract Variation in England

An employment contract is a legally binding agreement between you and your employee. An employment contract will contain the terms agreed by both parties such as the employee’s pay, start date, working hours and the parties’ rights and responsibilities. Whilst your employment contracts need to be drafted when your employees begin their role with you, there may be times as their employment progresses that you need to vary the terms of their employment contracts. You therefore may wish to familiarise yourself with how to legally change the terms of a contract. This article will explain the legal mechanics behind employment contract variation and the implications of improperly amending an employment contract in England. 

Context for Employment Contract Variation

There are many reasons you may need to make changes to your employment contracts. For example, you may need to:

• ensure that they reflect changes to the law;
• accurately detail any changes to an employee’s role or responsibilities, such as hours of work, job duties or pay rate;
• update organisational changes such as the place where your employee works; or
• harmonise the terms of employment across the business following a reorganisation.

Ideally, the contract will have an effective variation clause. If so, you will have more flexibility when it comes to making any future amendments to the contract. But even if it does not, there are ways you can still vary the terms. 

Making Changes

Even where there is a variation clause that gives you the right to make unilateral changes, this is not always the best option. Instead, the following steps are the safest way to change your employees’ employment contracts.

Proposing Changes

In all instances, you should alert any affected employees to any proposed contract amendments. How you go about this will depend on the circumstances. For example, if just one employee is affected, you will need to discuss the change with them to see if they are content. If many employees’ contracts need to change, you may need to hold a panel or presentation. 

Generally, you should inform all affected employees of:

• the substance of the proposal;
• the purpose behind the proposal;
• the timeframe for making the change;
• that they are an employee that stands to be affected; and
• any alternatives to the proposal. 

Where affected employees are represented by a trade union, you should inform the representatives. If the change relates to any provision governed by a collective agreement, this creates an additional legal hurdle. 

Consultations

In some instances, you may have a legal obligation to have a formal consultation with any affected employees. However, best practice dictates you should consult with any affected employees regardless of your legal obligations. 

A consultation allows you to listen to any concerns and hear your staff’s views on the proposed changes. Consultation helps you obtain support for the changes proposed to employment contracts.

You will likely need to consult with any employee representatives, either separately or as part of the employee consultation.

Undertaking Employee Contract Variations

If you have obtained consent from affected employees, all you need to do is amend the relevant terms. A solicitor can advise you on how to draft and implement any amendments to the contract. At the point the affected employees voluntarily sign the amended contract, the law treats the amendments as effective. 

Just because you obtain a signature from an employee does not make it effective. If they allege that you coerced them, the law may not recognise the amendment. 

If you have not obtained consent from one or more affected employees but the original contract contains a variation clause, you may be able to unilaterally amend the contract. Though practically, this may not be the best option. You may consider negotiating with reluctant parties, such as by offering a change in benefits in exchange for their acceptance of the proposal.

What Can Be the Repercussions of Changes to an Employment Contract?

Before you make changes to your employment contracts, you should consider carefully if a change to your employees’ employment contracts is the best way of dealing with the issue at hand. Changes to employment contracts can be risky and result in tensions in your business if not well managed.

Some of the repercussions of varying your employment contracts are as follows:

• problems with working relationships;
• low employee morale, productivity, well-being or health;
• legal issues such as constructive dismissal claims or breach of contract claims;
• unlawful discrimination if changes only affect employees with protected characteristics, such as women;
• loss of valued staff;
• damage to your reputation as an employer; and
• industrial action.

Key Takeaways

As an employer, you may conclude it is necessary to amend one or more of your employee’s contracts. If so, you should ensure you follow best practices to minimise your legal liability and maintain healthy trade relations. When undertaking employment contract variation, you should first propose the changes to your staff and then consult with them. Ideally, you will obtain their consent, which may require concessions on your end, such as a pay rise or reduction in hours. 

If you need help understanding how to vary an employment contract in England, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

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