Changing an Employment Contract
Before you make a change to an employee’s conditions or contract, this section tells you what you need to be aware of. Change is best undertaken when all options have been considered with the employee’s involvement and agreement.
Free advice is available from ACAS (see resources below) or your insurance indemnifier and should be taken, even if you are confident in this area, as employment law can change.
If an employer needs to make a change
An employer can make a change (‘variation’) to an employment contract if:
- There’s something in the contract that allows the change (usually called a ‘flexibility clause’) but this must still be exercised reasonably
- The employee agrees to the change
- The employee’s representatives agree to the change (for example, where there is an agreement with employee representatives (from trade unions or staff associations) that allows negotiations on terms and conditions)
An employer can force a new contract on employees, although this should be a last resort as it is not without risk and could lead to legal action.
If there has been a TUPE transfer
There are additional considerations when changing an employment contract after a TUPE transfer. TUPE stands for Transfer of Undertakings (Protection of Employment). The purpose of TUPE is to safeguard employee rights (which includes terms and conditions of employment) in certain circumstances where there is a change of employer. Find out more about changing an employment contract after a TUPE transfer in the resource links below
Consult employees to agree changes
Open discussion with employees about changes to their contract helps:
- Employers and employees work together to agree changes
- Prevent potential disagreements or legal disputes
If an employer needs to change a contract, the first step is to talk with employees (or where relevant employee representatives like a trade union).
Before consulting employees, it’s a good idea for employers to think about:
- Why they need to make a change
- What they need to achieve by making a change
Consultation should be a two-way process where ideas are shared and worked on together.
The employer should:
- Explain the reason behind making the change
- Invite employees to talk about their concerns and suggest ideas for alternatives
- Listen to employees’ concerns and consider their ideas
- Do everything they can to resolve any employee concerns
The employee should:
- Consider the proposed change and reason for the change
- Share their views, concerns and any ideas for alternatives with the employer
- Continue to talk to the employer about any concerns
- Make sure they have tried all options to reach an agreement
Consulting trade unions
Consulting with trade unions or employee representatives where relevant, openly and honestly can help to:
- Have meaningful discussions with employees
- Get a better understanding of employee concerns Sometimes there is also a legal obligation to consult trade unions ( this is called collective consultation where there are more than 20 employees affected)
Consider all alternatives
Considering all options and asking employees for ideas can help agree a change. Employees might suggest something the employer had not thought of.
Depending on the proposed change, employers might consider:
- Asking for volunteers (if the change might suit some employees more than others)
- Offering incentives to employees
- Taking on some of the employees’ ideas
Incentives do not have to be pay-related, for example, an incentive could be:
- Extra leave or time off
- help with travel costs for a time if employees will have to travel further to get to work
When a trade union can agree changes Trade unions can agree contract changes for employees when:
- It’s written in the employee’s contract that the trade union can agree changes (‘incorporated’ into the contract)
- It’s not written in the employee’s contract but the employer normally agrees contract changes with the trade union (an ‘implied’ term of the contract)
Check for existing trade union agreements
Sometimes there’s an agreement between the employer and trade union (‘collective agreement’) that says the trade union can agree changes for employees. This could be for changes to specific contract terms like pay or holiday.
A collective agreement can only be enforced if it’s included (‘incorporated’) in the employment contract.
An employee does not have to be a member for a trade union to agree changes for them.
When changes are agreed
Changes can be agreed verbally or in writing.
Agreed changes do not always have to be in writing, but it’s a good idea to prevent any misunderstandings. It can also help to say when changes will take effect.
When changes must be in writing
If a change relates to anything that must legally be in the employee’s written terms (‘written statement of employment particulars’), the employer must notify the employee of the change in writing within a month of the change taking effect.
For example, the employer should do this if the change relates to:
- The job title
- The job description
- The job location
- Working hours
- Holiday entitlement
- Changes to collective agreements with a trade union
Written terms provided before 6 April 2020
If the employee’s written terms were provided before 6 April 2020 and need to change, the employer must give all the following in writing to the employee:
- Any changes to the existing written terms
- Extra information required for new written terms since 6 April 2020 (particulars of the days of the week the worker is required to work and whether or not such hours or days may be variable and, if they may be, how they vary or how that variation is to be determined; any terms and conditions relating to any paid leave (other than holiday or sick leave); any other benefits not covered elsewhere in the written statement; details of any probationary period; details of any training entitlement provided by the employer; any part of that training which is compulsory and particulars of any other compulsory training which the employer will not pay for.
When changes are not agreed
If an employer and employee cannot agree a change, it’s often best for them to keep talking for as long as possible and make every effort to reach a compromise.
It can help both the employer and employee if they:
- Keep talking
- Consider all options
- Follow their workplace’s policies, for example, employees should use the employer’s grievance procedure if they are not happy with the proposed change
If there’s no flexibility clause and changes cannot be agreed, the employer might still be able to make a change.
Forcing a change by dismissing and rehiring someone
If agreement cannot be reached, an employer might decide to dismiss and rehire (‘re-engage’) the same employee under a new contract. This should be a last resort, and only after consulting the employee.
If you’re an employer considering this option, first think about:
- Whether you’ve done everything you can to reach agreement
- Whether the changes are absolutely necessary
- The risk to employee engagement and morale
- The risk of legal action
If deciding to dismiss and rehire, the employer should:
- Follow a fair dismissal procedure
- Give the employee enough notice (statutory notice or what’s in the contract – whichever is longest)
- Offer the employee a right of appeal against their dismissal
Changes should not take place until the employee has been fairly dismissed and then rehired under the new contract.
The employee keeps continuous service if the new contract starts immediately after the old contract ends. Find out more about dismissing someone fairly.
Risks for employers who dismiss and rehire
If an employee feels they’ve been unfairly dismissed from the original contract, they might be able to make a claim to an employment tribunal. They would usually need to have worked for 2 years for the employer to make a claim.
If 20 or more employees are being dismissed and rehired, the employer can face legal action if they do not hold ‘collective consultation’ with any recognised trade unions or employee representatives.
Employers can be fined up to 90 days’ pay per affected employee for failing to collectively consult.
If you are an employer considering dismissing and rehiring employees, it is best to get legal advice first to check you are making the right decision.
When forcing a change might break a contract
An employer might be breaking a contract’s terms and conditions (in ‘breach of contract’) if they:
- Force a change without the employee’s agreement or a flexibility clause in the contract
- Dismiss and rehire an employee without notice
Breach of contract could lead to legal action.
Forcing a change without discussion or agreement could also lead to:
- Lower levels of engagement and performance in the workplace
- Employees working under protest
If there has been a breach of contract, an employee could make a claim against the employer for:
- Damages at a civil court (an employment tribunal’s jurisdiction to consider breach of contract claims is subject to certain restrictions)
- Unlawful deduction from wages at an employment tribunal, if the change affects pay
- Constructive dismissal at an employment tribunal, if they have at least 2 years’ service and the breach is fundamental and significant. For example, an employee felt forced to leave a job because the employer made their pay a lot less
Making changes to employment contracts can be a complex legal matter. You can also speak to an Acas helpline adviser who will explain possible next steps and the risks and benefits of each. Acas advisers cannot tell you what to do or give legal advice.
Employees who do not agree to changes
Employees with concerns about contract changes proposed should start by speaking to you.
It can help if they:
- Check if their contract e.g. to look at any flexibility clauses
- Explain how the proposed changes will affect them
- Listen to their your reasons for proposing the change
- Take part in any consultation, if you offer it
- Think about any compromises they are willing to make
- Talk to their trade union or employee representative if they have one
- They may think about making a formal complaint (‘raising a grievance’)
Try to reach a compromise
If they do not agree with proposed changes, it’s usually best to keep talking to see if you can find an arrangement that suits you both.
They should consider:
- Your reason for the proposed changes
- The effect of the changes on you both
- Any other options that you could look at
- What could happen if you cannot reach an agreement
The more you discuss the changes, the more likely you are to reach an agreement.
An employee can make a formal complaint to you (‘raise a grievance’).
This can be a useful way to keep talking with the employer about the proposed changes.
A formal complaint can help to:
- Raise concerns about the changes
- See how the changes might affect the employee
- Share ideas for alternatives
- See what compromises might be made
Working under protest
If you impose a change the employee doesn’t agree to, they can choose to stay and temporarily work to the new terms and conditions ‘under protest’.
This should only be for a short time so they can formally raise concerns, or take legal action.
They should make it clear to you that they are working under protest (usually in writing on a routine basis, for example every time you get paid).
If they don’t raise objections and start to work under the new terms and conditions, this could be seen as accepting the change.
Options for making a legal claim
If they feel you have broken the terms and conditions of their employment contract, or dismissed them unfairly, (including constructive dismissal) they might be able to make a legal claim.
If they have been with you for less than 2 years, there are fewer options for making a claim.
If employees want to change their contract
Employees can ask to have their contract updated if their job has changed.
They can ask you for changes to be put in writing. For example, if they have:
- Been doing work that is different to your original agreement
- Started a new job in the same organisation
You do not always have to put changes in writing, but it’s a good idea to.
Even if employees do not have anything in writing, they still have certain employment rights and protections by law, from when they started working for you.
When changes must be in writing
If changes affect your employees written terms (‘written statement of employment particulars’) they can ask you to provide an updated copy. You must provide this within a month of the changes being made.
Take a look at the ACAS resource below on changing an employment contract.