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Changing Terms and Conditions of Employment

Updated: Feb 16

The Coronavirus pandemic has significantly affected the workplace in a great many ways, from home working to hygiene, desk layouts to sharing birthday cake. For many employers whose businesses have survived the crisis, it is an opportunity to revisit the terms and conditions of employment, especially if they have been found wanting or no longer reflect the ‘new normal’. For example, it may be that a salary decrease is needed to ensure the business survives.

Of course, it is nowhere near as simple as just rewriting the contract and expecting everyone to accept it. Legal considerations need to be taken into account, or the employer could find themselves facing an Employment tribunal claim.

First things first

Before setting off on the path to contractual change, it is often worth considering whether such a thing is actually necessary. It may be that the change can be implemented via part of a non-contractual policy which the employer can then change without trying to get agreement from the affected workers.

However, it should be borne in mind that even though a policy is not included in the employment contract, it may still be considered a contractual term. It’s a complex area of law and certainly something on which it would be a good idea to get legal advice.

Another thing to think about before moving to the step of proposing a change is that there may be contractual terms contained in other agreements, for example a collective agreement with a trade union and these will need to be taken into account.

Discussion and agreement

It is very important to note that an employee's terms and conditions of employment should not be changed without discussion and agreement with the individual(s) concerned.

The first step that needs to be taken is to make an announcement to all those affected. This may be the whole business; alternatively, such a variation may only affect some of the business.

Once the announcement has been made, the proposal should be confirmed in writing and each person affected invited to an individual consultation meeting. While there is no definitive timescale in law, it is generally accepted that a minimum of three working days' notice should be given of the meeting.

The consultation meeting

As the meeting is an informal one, employees do not have the right to be accompanied. However, it may be a good idea to allow them to be accompanied by a work colleague.

At the meeting itself, the following topics can be covered:

  • the business proposal;

  • what effect this will have on each employee. For example, where it is a salary decrease, the gross and net affect this will have on the employee's earnings can be explained;

  • whether the employee has any initial thoughts about agreement; and

  • If the employee is not sure or not minded to agree, whether they have any counter-proposals they would like to make.

Any counter-proposals should be given active and serious consideration. It is likely that in such circumstances, further meetings may be required.

If agreement is obtained

Following agreement, the employee must be given written notification containing details of the change and when it will take place as soon as possible and no later than one month after the change has taken effect. It is not necessary to re-issue the contract, but a clause must be inserted into the written notification indicating that 'all other terms and conditions as contained within the contract of employment remain unchanged’.

It is worth noting that an employee's period of continuous service is not affected when varying the terms and conditions of employment.

In the absence of agreement

Regardless of the perceived strength of the employer’s proposition, some (or even all) employees may not give their agreement to the change. If this happens, the employer may want to consider offering an incentive. For example, in exchange for a variation to contractual hours, the employer could offer an increase in pay or a bonus.

However, if this approach fails to obtain agreement, the employer is left with three options:

Decide to do nothing

This might occur in circumstances where there is an overwhelming rejection of the proposal by the workforce and the employer decides that it is not worth the potential difficulties they may face if they impose the change.

Impose the change anyway

This could be justified if there is just one hold-out and agreement has been obtained from all other employees.

Then, following appropriate consultation, the employer could determine that they are happy to take the risk and impose the variation of contract on all employees. The disgruntled employee may take the view that the employer is in breach of contract and claim constructive dismissal and/or bring an action for breach of contract or an unlawful deduction from wages either in the civil courts or Employment tribunal. Depending on the nature of the dispute and the level of support from the workforce, an employer usually succeeds with this type of 'defence'.

However, this should not be taken for granted and it is strongly advised that legal advice is taken before embarking upon this strategy.

Terminate all contracts

The third option is to terminate the contracts of the entire workforce and offer everybody fresh contracts of employment on terms which are more acceptable to the employer. While this is a tactic that has often succeeded, it is fraught with danger as employees, assuming they have the requisite qualifying service, have the right to accept the termination of their employment, refuse the alternative offer of employment and claim unfair dismissal in the Employment tribunal.

It is also worth remembering that if the number of employees being dismissed and re-engaged exceeds 20, the employer will have to implement and follow a formal collective consultation process so that the change can be made. If an employer finds themselves in this situation, they should certainly get legal advice on their obligations. Failure to consult correctly on redundancy can cost an employer dearly as a claim can be issued at the tribunal for a protective award. The maximum award is 90 days’ pay, per employee and is not subject to weekly statutory cap.

In the latter two cases, an employer's ground for resistance of the claim is that the dismissal was fair for 'some other substantial reason'.

Written by

Kerry Noon, HR Advisor at rradar

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