Changing terms of employment

Changing terms of employment

This blog just provides an overview of the law in this area. You should talk to a lawyer for a complete understanding of how it may affect your particular circumstances.

This article sets out the key issues a business will need to consider when changing employees’ terms of employment.

An employee’s terms will usually change during their employment for example their salary, or job title following a promotion, but if the employer wants to change something that an employee is less willing to accept, they must know the best way to make the change legally binding, with minimal disruption to the business.

A contract can only be amended in accordance with its terms or with the agreement of the parties. Some changes won’t require the contract to be amended, but it is good practise to carry out a consultation process before changing any terms of employment.

The business should decide whether plans would affect the contract. This is done by the business identifying the existing terms of the contract:

  • Express: terms explicitly agreed between the parties (orally or in writing).
  • Implied:terms may be implied for a number of reasons, for example through custom and practice.
  • Incorporated: terms may be incorporated into the contract by law.

Some terms will not be part of the contract, for example, benefits that are stated to be non-contractual or “Policies” which merely provide guidance on how the contract will be carried out.

If the proposed change will affect existing terms of the contract, the business will not need to amend the contract if:

  • The existing terms are sufficiently broad to accommodate the new proposals.
  • There is a specific right for the business to vary the contract in this way.
  • The contract gives the business a general power to vary its terms.

Having said that, it is important to be aware that:

  • Any ambiguity in the terms of the contract will be construed against the business.
  • Any specific flexibility clauses will be given a restrictive interpretation by the courts and may be limited by an implied term (for example, an obligation to exercise the clause reasonably).
  • General flexibility clauses can probably only be used to make reasonable or minor administrative amendments that are not detrimental to the employee.

If a business’s proposals involve altering the existing contract and there is no contractual right to make such a change, the business can consider the following options:

  1. Express agreement
  • The employee may agree to the business’s proposals orally or in writing (although an oral agreement is clearly more vulnerable to challenge at a later date).
  • For the contractual amendment to be binding, the employee must receive some form of benefit in return. In many cases, the employee’s continued employment will be sufficient, but there may be problems when the change does not have an immediate effect (for example, when the employee’s rights on termination are altered).
  1. Unilaterally imposing the change and relying on the employee’s implied agreement

This strategy is more likely to be effective if there is an immediate practical effect on the employee, like a pay cut, and they continue to work without objecting. Businesses can consider tying in changes to rate of pay with a Christmas bonus, to give employees an easy way to give consideration for the change, without needing to make unplanned additional changes.

A business should not assume that silence is sufficient to indicate implied agreement, especially if there is no immediate impact on the employee.

If the business imposes the change it will be a breach of contract. The employee can:

  • Comply with the new terms but work “under protest” and claim for breach of contract or unlawful deductions from wages. Where there is a substantial change, the business may be deemed to have dismissed the employee, and therefore the employee may also bring a claim for unfair dismissal.
  • Resign and bring a claim for constructive dismissal, if the change is sufficiently fundamental.
  • Refuse to work under the new terms.
  1. Dismissing and offering re-engagement on new terms

This approach avoids the risks involved in unilaterally imposing the change on the employee. However, as a result, the employee may be able to claim either:

  • Wrongful dismissal, unless the business gives the appropriate period of notice (or makes a payment in lieu of notice).
  • Unfair dismissal, unless the business can establish a potentially fair reason for dismissal and show that it acted reasonably in deciding to dismiss the employee for failure to agree to the change.

A refusal to agree to a change in contracts will usually amount to some other substantial reason for dismissal, provided there is a sound business reason for the change.

If you’d like more advice on changing terms of employment please contact our solicitors on 01283 526200.


Image courtesy of basketman at

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