Can an employment contract be changed by an employer?
An employer cannot usually change an employee’s existing contract without their agreement. In situations where an employee believes a proposed change is not in their interests, they may refuse to give their agreement to a change. For example, to some sort of pay cut or reduction in benefits or a change to established working hours.
If the employer presses ahead with making changes to an employee’s contract of employment without their agreement, there is a risk of legal claims from the employee such as breach of contract and constructive dismissal.
However, there may be some situations where the employee’s contract expressly allows the employer some flexibility to make changes without agreement. A common example of this would be a mobility clause which gave the employer the power to change the place of the employee’s work.
How the employer tries to exercise any such flexibility will be very important. An employer will always be expected to behave reasonably towards employees when seeking to change their contracts by talking to them about the change openly and in good time. Employment tribunal enforce flexibility clauses very strictly. If the wording of the clause is not crystal clear an employer will not succeed in relying upon it.
Types of contract changes
The first and most important issue to establish is whether the term that an employer wishes to change is contractual or non-contractual?
It’s important for an employer to understand the status of the term it is trying to change. If it is a non-contractual term then the employer will be free to change this without seeking the agreement of employees. Workplace policies such as those contained in staff handbooks are often stated to be non-contractual in order to give the employer the power to update them quickly and easily (i.e. without getting the agreement of employee) when it needs to do so.
If the term is contractual then it may not be necessary to actually amend the contract of employment if the relevant clause is written in such a way that it already allows the employer some flexibility. Examples of this might be found in a duties clause which is very wide, or a place of work clause which requires a certain level of mobility from the employee.
Where an employer is seeking to change a clause, which does not have flexibility already written in, it may seek to rely on a free-standing flexibility clause elsewhere in the contract. However, such clauses are quite rare and are difficult for an employer to rely on.
How to manage contract changes
If an employer wishes to change a term that does not have flexibility built in and there is no general flexibility clause, then it will need to obtain employees’ agreement before making the changes.
This may be given in a signed letter or other document, or may be implied from the individual’s conduct.
For uncontroversial changes, an employer may be happy to rely on implied consent. If the employee, in full knowledge of the change, carries on working happily and drawing their salary, they can be assumed to have agreed to the change i.e., this is implied by their conduct. An obvious example would be a pay rise.
For changes which are more controversial an employer may still not require express consent to be given by all staff but may make a general announcement and say that if objections are not made, employees will be taken to have agreed.
However, the safest course of action for an employer will always be to get express consent, in writing, signed and dated. This is particularly the case where the change will not immediately impact an existing employee, for example a new restriction that will apply only when they leave employee or a new redundancy scheme that won’t kick in unless the employee is dismissed for redundancy. Such changes are often linked to promotions or pay rises.
Where consent is not given by employees, an employer may still decide it is vital to go ahead with the changes (perhaps in a difficult financial situation). The employer’s only option here will be to dismiss employees who refuse to agree and offer to immediately re-employ them on the changed terms and conditions (the so called “fire and re-hire” method).
Holiday entitlement when contract changes
A worker’s holiday entitlement depends upon how many hours they work. A full-time worker is entitled to a minimum of 5.6 weeks or 28 days paid holiday each year (although employers may of course be more generous and grant staff more holidays each year, they just cannot give less). Part-time workers are entitled to a pro-rata amount of paid holiday, depending upon the number of hours they actually work.
Therefore, holiday entitlement will be unaffected by any changes to terms, unless these are changes to the hours worked by the individual. Where the individual is agreeing to work more or less hours their holiday entitlement will go up or down accordingly. This is the only scenario where a contractual change will affect holiday entitlement, unless the change was itself a change to holiday entitlement.
Changing employment contracts
We can help make changes to employee contracts and protect you from the threat of dismissal claims and tribunal proceedings.
Usually, changing terms (holiday, pay, place of work, etc.) needs employee agreement, but you may be surprised at how much control you have over such changes. We will help protect your business.
Expertise for employers
Starting employment: contracts and policies
During employment: handling staff problems
Common issues raised by staff
- Bullying and harassment
- Constructive dismissal
- Family rights and flexible working
- Holiday and working time