Five Key Points an Employer Should Know About Variation Clauses and Changing Employment Contracts in England

As an employer, you will likely have to make reasonable changes to your employment contracts throughout the employment relationship. Hence, a variation clause allows you to make changes to your employee’s employment contract, provided you have a good reason for the changes. However, if you change your employment contracts incorrectly, you could face an employment claim in an employment tribunal. This article will explain five key points you need to know about variation clauses and changing employment contracts in England. 

1. Why Might an Employer Need to Change Their Employment Contracts?

There are several reasons why you may consider making employment contract changes. These include to:

• ensure that your employment contracts reflect the latest employment law rules;
• detail changes to your employee’s job role;
• change an employee’s working hours or other conditions;
• change an employee’s place of work, such as if you sell your place of work;
• set out new terms and conditions of the contract, such as enhanced maternity pay; and 
• detail changes to your business.

If you consider employment contract changes, it is wise to see if you can make the change in any other way, as there can be risks to making changes to employment contracts.

2. What is a Variation Clause?

If you consider employment contract changes, you need to know what is a variation clause before making the changes. A variation clause states that you can make changes to your employee’s employment contract provided you have a good reason for the changes. Not all contracts have a variation clause in them. Hence, you may consider including such a clause when creating your employment contracts. 

3. How to Include a Variation Clause in an Existing Employment Contract

You must gain your employee’s permission if you wish to include a variation clause in your existing employment contracts. Some ways you can attempt to gain your employee’s consent is by:

• meeting with your employee to discuss adding the variation clause and negotiate it;
• remaining open with your employee about any changes you already have in mind; and 
• adding the clause into their contract once they have agreed to it.

4. What Does a Variation Clause Look Like?

If you decide to include a variation clause in your employment contracts, you should try to include a strong variation clause. The wording of the clause is crucial to enable you to make contractual changes or not.

A strong variation clause makes it clear what elements of the contract you, as the employer, can potentially change. For example, you may wish to ensure you can make changes to:

• your employee’s work hours;
• the amount you pay your staff; or
• be able to lay off staff where business is unusually quiet.

5. What is an Unfair Variation Clause?

If you are using variation clauses and changing employment contracts, you must understand when a variation clause may be unfair. Whether or not a variation clause is unfair can depend on how you use it. So, if you try to get your employee to agree to a reduction in employee benefits by using a variation clause, it is likely to be unfair. 

Another example of when it may be unfair is if you use a variation clause when the changes concern something you agreed on previously with your employee. However, where your employee has breached the employment contract on multiple occasions, using a variation clause in this manner may be fair.

Key Takeaways

As an employer, you may need to change your employee’s employment contract. Having a variation clause in place will allow you to do that. If your employment contracts include a variation clause, you must ensure that the changes you make are fair. For example, you should avoid using a variation clause to change parts of your employee’s contract that you have previously agreed on. 

If you need help understanding variation clauses and changing employment contracts 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.

Frequently Asked Questions