PLEASE NOTE: This page is intended to give general information about the law but is not intended as legal advice and you must not rely on it as such, nor is any liability accepted if you do rely on it. The law may change from time to time and we cannot include all elements of the law and its application in this summary. For further advice relating to your circumstances, please contact us.
When might an employer want to vary a contract?
Employment contracts should, in principle, only be varied with the agreement of both parties. In usual times, employment contracts tend to be fairly static, amended only when things like a pay rise or promotion arises.
However, in times of crisis, or where a business is in financial hardship, an employer may seek to vary contracts with employees (temporarily or permanently) by for example, cutting pay, or changing hours of work or reducing other contractual benefits.
How should an employer go about varying a contract?
A good employer should explain clearly the changes that they wish to make to the contract and explain why those changes are necessary. It should seek consent for the variation.
Employees may see the benefit of the change to terms, particularly if they are aware that the employer’s situation is genuinely difficult and that the changes may help stave off redundancies. An employer can ask an employee to change their terms and the employee may agree if they can see a good reason for it.
Any such agreed variations should be recorded in writing. If an arrangement is to be temporary the written variation must be clear about the period over which the variation will operate.
If there is a union with collective bargaining rights, then any negotiations should take place with the union.
What if employees do not agree the change?
Sometimes a contract of employment will allow the employer to make unilateral changes to the contract. These clauses are usually intended to deal with minor variations. An employer cannot lawfully vary contractual rights below certain statutory limits such as the minimum wage or statutory holiday entitlements.
Where there is no clause permitting unilateral changes, employees are not required to agree a change to their terms and conditions. However, if they do not, it might give the employer a good reason to consider other measures, for example, in some situations, as redundancy dismissals.
Where an employee does not agree a change, the employer must decide what to do. It can impose the change and hope that employees do not objects. Employees would then need to take action to show that they did not agree, such as raising grievances or tribunal claims; or resigning and claiming unfair constructive dismissal (we do NOT suggest you resign in these circumstances without first obtaining legal advice). If employees do not object they are likely to be taken to have consented to the change.
Imposing a change is a risky way forward for an employer if it wants to change a contract in a significant way, such as reducing employees’ pay.
The other mechanism for an employer to change a contract is to consult appropriately regarding the change and, if the change cannot be agreed, then consult regarding potential dismissals (individually and where required, collectively - see below). After a period of consultation, the employer can issue contractual notice of dismissal, usually alongside an offer of re-engagement on the new varied terms.
Such dismissals are by reason of “some other substantial reason” (one of the potentially fair reasons for dismissal). Whether the dismissal is fair will depend on whether the employer had a good business reason for the change; and whether it followed a fair procedure in consulting employees about the change.
If an employee wishes to challenge a variation in this scenario, they would do so through an unfair dismissal claim. The claim is only open to those with more than two years of continuous service.
What must employers do if they intend to dismiss and offer re-engagement?
Employers must consult with employees on the rationale for the proposals before to deciding to dismiss. They must also try to mitigate the effect of the change and engage with any suggestions raised by employees in the consultation period.
Where the proposal is to dismiss 20 or more employees within a 90 day period, collective redundancy consultation provisions will also apply, meaning that the employer has to consult with either the recognised trade union (if there is a recognised union) or with employee representatives (if there is no trade union). Where there are 20-99 employees proposed to be dismissed, the consultation should last for at least 30 days. Where there are 100 + employees proposed to be dismissed, the consultation period is 45 days.
Employers must consult in good faith, i.e. with a view to reaching agreement.
Deadlines for bringing a claim
The deadline for an unfair dismissal claim is 3 months from the date of the last day of employment. If an employee is dismissed and re-engaged, the time limit runs from the last day of the “old” employment. The claimant must notify ACAS of a claim within the initial three month limitation period. There will always be at least one month to issue a claim to the employment tribunal from the date of the issue of the ACAS early conciliation certificate.
If an employer has imposed a change which wasn’t consented to, an employee might elect to stay on but raise a claim for unlawful deductions from wages (if the matter relates to a reduction in pay). There is a three month deadline for this claim also, from the day on which the employer paid the employer at the lower rate. The claimant must notify ACAS of a claim within the initial three month limitation period. There will always be at least one month to issue a claim to the employment tribunal from the date of the issue of the ACAS early conciliation certificate.
See our other information sheets for more detail on claims.