Employer’s Guide To Changing Employee Terms And Conditions

Employers often find themselves in a position where they may want to change employees’ terms and conditions of employment. For instance, a change in the needs of the business could result in a business having to change an employee’s hours of work or shift pattern.

Employers may also seek to reduce their employees' core contractual entitlements, such as their rate of pay, holiday or pension entitlement, if they feel that they can make a substantial cost saving. The proposed change may just apply to one employee or it could impact on the entire workforce.         

Below we examine the options available to businesses that are seeking to change employee terms and conditions of employment, and the potential risks involved.

Do I Need An Employee's Agreement To Change Their Contractual Terms?

As a general rule, changing an employee’s contractual terms will require their agreement.

There are some circumstances through which an employer may be able to make a change without their agreement. However, you should have a strong business case for doing so.

The process should also involve conducting meaningful consultation with employees affected. As an employer, you should at least consider alternatives when an employee objects to a proposed contractual variation. 

If you are considering making changes to the terms and agreements of an employee's contract, it is advised you get in touch with an employment law specialist first.

Changing Employee Terms And Conditions

When contemplating making a change to any contractual terms, employers should also set out their business case in writing. This helps you set out a clear action plan, avoiding confusion further on down the line.

If matters do get contentious and employment tribunal claims are issued against your company, then setting out a business case could help you justify your approach. As an employer, the business plan should also set out the potential consequences if the proposed contractual variation is not put in place. 

A basic example may involve a care home setting out a business case to explain why a change in shift pattern is required. Its justification may be that a failure to make the change could impact on service levels, thereby having a detrimental impact on service users.

How Do I Present The Case To My Employees?

Firstly, employers need to be clear on what changes they are proposing and when this will take effect. A concise business plan will help in this case.

The change may benefit employees, presenting less of an issue. For example, you could change your employees’ hours of work but offer a higher hourly rate at the same time. In this type of case you may present a proposed change as something that employees do not have to accept. In such a scenario, employers can often be confident that the financial benefit itself will give the employee an incentive to agree to the new terms.

It can be a lot more difficult for employers where the proposed change is likely to have a negative impact on the workforce. In this case, you need to really emphasise why the change is vital and the potential impact it could have if the changes are not put in place. It is also sensible for employers to offer a period of consultation for employees who may reject the proposed changes.

Presenting your case for the changes to employees can be a difficult exercise for employers. Having a strong business case and backing this up with information should make the process easier. If you are unsure about anything, you may wish to seek advice from a legal professional before approaching your employees.

What Options Exist For Employee Objections?

Where an employee or a group of employees object to a business changing employee terms and conditions, the employer is faced with one of two options:

  • Impose the change unilaterally  
  • Dismiss the employee on their existing terms of employment and re-engage them on the new proposed terms

There is no general rule of thumb as to which approach is taken, as it can quite often depend on the circumstances. In order to reduce the risk of employee unrest or the risk of employment tribunal claims being issued, you should always consult with any objecting employees.

An employment tribunal will consider whether an employer has explored alternatives to actually enforcing the change. As an example, on a proposed change of hours, an employee may be able to work on certain shifts but not on others. An employer should at least consider amending the proposed change to accommodate the employee. If this is not possible, then the employer should have a solid business case so that it can justify its decision.

What Are The Other Effects Of Changing Employee Terms and Conditions?

Aside from any legal risks, there is a danger that enforcing a contractual change could lead to general disaffection within the workforce. As a practical step, you may consider proposing a certain change and then seeing how the workforce reacts. If employees are opposed to a proposed change then you can always change your position at a later point.

Constructive Dismissal

If an employer proceeds in enforcing a contractual change then the employee could treat this as a fundamental breach of contract and issue a constructive dismissal claim. This type of claim involves the employee resigning as a result of an alleged breach on the part of the employer. This is different from the more conventional type of unfair dismissal claim, which would involve the employer actually dismissing the employee.

The strengths of the employee’s constructive dismissal claim will depend on factors such as the nature of the proposed change and whether the employee has undergone a consultation exercise.

Breach Of Contract Claims

Employers also face the risk of their employees issuing breach of contracts claims based on the change. One option available to the objecting employee is to remain in employment and ‘work under protest’. This involves the employee making it clear that they are not agreeable to the new terms.

The employee can then issue a claim against the employer for any loss suffered a as a result of the change. If you are unsure whether your actions may lead to a breach of contract then make sure to contact a legal professional before imposing any changes on your employees.

Unfair Dismissal

An employer may also be placed in a position where the employee remains in employment and simply refuses to work under the new terms. It is an option for the employer to take disciplinary action against the employee if this does happen. This could eventually result in the employee’s dismissal. The employee could then bring an unfair dismissal claim against the employer.

A tribunal will take into account whether the employer has acted reasonably in dismissing the employee. In doing so, factors such as the employer’s business case and the level of consultation that the employer has had with the employee will be taken into account.

How Can Simpson Millar Help With Changing Employee Terms And Conditions?

For any employer or business, it is important to protect yourself against employment tribunal claims.  These could prove costly and could result in your business attracting adverse publicity.

If you are considering changing your employees' terms and conditions, contact a member of our Employment Law Team on our freephone number or through our digital enquiry form.

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David Hession | Associate, Employment Law | Simpson Millar LLP

David Hession
Associate, Employment Law

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