What to Look for When Reviewing or Changing Employment Contracts?

Your employment contracts with your employees are one of the most fundamental parts of the employment relationship. Employment contracts often act as the first piece of evidence if an employee makes a claim against you at an employment tribunal. It is, therefore, important that your employment contracts are accurate and kept up to date. This article will explain what you should look for when reviewing or changing employment contracts. It will explain what an employment contract is and why you may need to update or review your employment contracts. It will also discuss what to look out for when doing so.

What is an Employment Contract?

An employment contract is an agreement between you and your employee regarding their employment. It details what your employee must offer you and what you are obliged to offer them in return. In addition, it sets out the terms and conditions relating to this.

An employment contract will explain, for example:

• the role of your employee;
• how they should perform;
• what pay you will give them, including, for example, any bonuses and commissions; and 
• what might happen when the employment contract comes to an end.

Why Might You Need to Review or Change an Employment Contract?

As an employer, there are times where you may need to review or change your employment contracts. For example, where:

• an employee is promoted;
• someone starts a new job role;
• your employee has a dispute concerning their contract of employment;
• your business is re-organised or merges with another; or
• you need to make changes to your workforce, such as redundancy or relocation.

General Review of Employment Contracts

You may decide to make changes or review your employment contracts rather than make changes to individual employment contracts. For example, you may decide to review your contacts every few years. 

It may be the case that changes have occurred in employment law in the UK since the time you initially drafted your contracts. Indeed, employment law is an area of law that is often changing. In that case, it is good practice to review your contracts and ensure that they are still compliant with the law. 

You may also review your employees’ employment contracts to ensure that they are all uniform for administrative ease. Also, business competition may have changed since your employees started working for you. Therefore, you may decide to review their employment contract regarding post-termination restrictions such as restrictive covenants. These stop your employees from competing with your business after the termination of their employment.

Changes to Processes and Contractual Terms

Additionally, you have a right to make reasonable changes to your employees’ employment contracts with a flexibility clause. For example, this might include a reasonable change to the location of the workplace. However, you should be cautious about this as a flexibility clause does not allow you to make any and all changes.

When you change employment terms and processes in your employee’s contract, you normally need to seek agreement from your employees. Your employees also have a right to be consulted about such changes. Therefore, it is important that you:

• involve your colleagues or their representatives through consultation or negotiation;
• make it clear to your employees why you are making the changes; and 
• be open to other changes suggested by your employees.

Importantly, you must be careful about how you go about changing your employees’ contracts.

What to Look Out For

Role Description

Suppose an employee’s role has changed. When reviewing their employment contracts, you may need to think about what the employee is doing differently from what the employment contract states. You will also need to consider whether your employee is starting a completely new role within your business. Whilst it is not a legal requirement to document job role changes in writing, it is good practice to do so.

Business Uniformity 

When reviewing your employment contracts for business uniformity, you should look out for general terms such:

• termination; 
• expenses; 
• leave entitlements; and 
• sick pay. 

However, you should note that some contractual terms will differ between employees, such as their work hours and holiday entitlements.

Other Areas of Consideration

Additionally, when carrying out a general employment contract review, you may need to focus on several areas. These are as follows:

• data protection issues;
• health and life insurance;
• any pension benefits;
• restrictive covenants which prevent your employees from competing with you once their employment contract is terminated;
• any entitlement to shares in your business; and
• any tax issues.

Seeking Consent

If you decide to change your employees’ employment contracts, you need their consent. Likewise, you must update their written statement. A written statement is the document you give your employees and workers stating the details of their work and the terms and conditions when they begin working for you. 

Key Takeaways

As an employer, you will need to review or change your employment contracts. In fact, it is important that you carry out general reviews from time to time to ensure that they comply with employment law. Likewise, there may be times when you need to make specific changes to your employment contracts. For example, your business structure changes, or an employee receives a promotion. It is important that you are aware of how you can amend employment contracts and the rules relating to this. This is because changes could amount to a fundamental breach of the employment contract. The consequence is that you might find yourself in an employment dispute. 

If you need help reviewing or changing employment contracts in England and Wales, 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.

Frequently Asked Questions