Employment contracts: How to change them and what to include

Blogs 19 Jun 2020

With businesses slowly reopening and employees returning to work, we explain the process of changing employment contracts and what your employment contracts should include.


Your employment contracts should contain all the important details of the employer and employee’s rights. It’s a legal requirement which details your employee’s role within your business.

As well as setting expectations and it being a legal requirement to provide a written statement of particulars of employment, an employment contract can also help you to avoid employment tribunals. This is because a written employment contract is evidence of the employee’s terms and conditions, reducing the risk of dispute arising regarding these.

If you’re changing a contract of employment, such as reducing contracted hours or changing shift patterns, this needs to be agreed by the employee in order to be legally valid.

FSB members have access to our employment protection helpline. We strongly advise that you call an expert before you take any action such as changing existing contractual terms and conditions of employment, to ensure you follow the right processes and stay on the right side of employment law. 

In this guide, we’ll walk you through the steps you need to consider when changing an employment contract, as well as some of the key elements that should be included in your employment contracts.

What should you do when changing a contract of employment?

There are three main steps to consider during the process of changing a contract:

  1. Agreement with the employee
  2. Changes to the contract
  3. Dealing with potential disputes

1. Agreement with the employee

Making changes to an employee’s contract that are not already permitted by the contract by way of a contractual ‘flexibility clause’ (for certain reasonable changes) needs to be agreed by the employee in order to be legally valid. This includes changes to their role and responsibilities, contracted hours or agreed shift pattern.

There are a few steps you should follow:

  • Consult the employee or their representative (such as a trade union)
  • Be clear about why you are making the changes
  • Listen to other ideas from the employee

What if I make changes without an agreement?

As an employer, changing an employee’s contract without prior agreement may result in the following:

  • The employee has the right to refuse to work under the new conditions
  • The employee may treat the change as a breach of contract
  • The employee could resign and claim constructive dismissal due to a fundamental breach of contract (where they have at least 2 years’ service, or 1 year’s service in Northern Ireland)
  • The employee may be able to take the case to an employment tribunal

What if an employee refuses to change their contract?

If you are unable to agree with an employee a change to their contract after consultation and negotiations, a last resort may be to end the contract and re-employ someone with your new terms and conditions.

However, if you do this, to remain legally compliant, you need to follow the correct process of ‘dismissal and re-engagement’ or a redundancy procedure  if the refusal may place the employee at risk of redundancy, or if you are proposing to ‘dismiss and re-engage’ at least 20 employees within a 90-day period. It’s important to follow this process fairly and correctly, as an employee may be able to take their case to a tribunal and claim there has been a breach of contract, or that they were dismissed unfairly Employees require at least 2 years’ service to bring an ordinary unfair dismissal claim or a constructive dismissal claim (1 year in Northern Ireland) but employees may claim unlawful deductions from wages (where an imposed contractual change results in a reduction in wages) or breach of contract, regardless of their length of service.

2. Changes to the contract

Once the change has been agreed by with the employee, you will then need to update the terms of their contract in their written statement. You should follow up in writing with the employee to let them know what has changed in their contract.

If this change isn’t in their written statement, you should direct employees to where they can find the updated information, such as in your company handbook.

What do I need to do if I am changing a flexibility clause?

Your employment contracts may include flexibility clauses, which give employers the right to change some conditions of employment. For example, your flexibility clause may involve relocation, whereby you may ask employees to work shifts at nearby branches of your shops if required.

However, you should note that this only allows employers to make reasonable changes.  Employees should be given reasonable notice of any change under a flexibility clause. To avoid a breach of contract, the change should be made in accordance with the mechanism or process, if any, set out in the flexibility clause.

3. Dealing with potential disputes

As we mentioned, if you make changes to an employee’s contract without their agreement first, this can cause problems for your business and claims of breach of contract from the employee.

If the dispute can’t be solved through mediation or informal discussion between the employer or employee, then legal action may become the next step.

Employers should always seek guidance before taking legal action.

If your employee claims a breach of contract, this could result in the case being taken to an employment tribunal.

What should be in my employment contracts?

There are a number of areas to consider when both drawing up and assessing your employment contracts. You can find comprehensive guides and advice for employment contracts on the FSB Legal Hub.

Here are a few examples of what should be included in your employment contracts:

Responsibilities

Primarily, an employment contract needs to define exactly what responsibilities, tasks and duties that the employee will have, as well as what their job title is and who their direct supervisor or line manager is. Especially if you are making changes to employment contracts, your business will run more smoothly if your staff understand what is expected of them, and you’ll be in a better position to track their performance.

If the employee ends up performing a significant amount of additional duties not detailed in their contract, they could seek to raise a grievance against your business. This may result in the case being taken to an employment tribunal, so you should be clear about what is expected when changing an employee’s contracted responsibilities.

The contract should include information as to who an employee can report to in the event of a grievance, as well as what you will do as a business to record and deal with any grievances.

Working hours

The employment contract should outline where the employee will be based during work and how many hours they will be working. For example, will they be working fixed hours Monday to Friday, or variable shift patterns? Is there an expectation to work Sundays, bank holidays or night shifts?

Any changes to these hours should be agreed upon with the employee and detailed in the employment contract.

Pay, holidays and sickness procedures

You should include details of the wage that will be offered. This can be as an hourly wage or an annual salary, as long as it meets the National Minimum Wage. You should also highlight the policy for overtime pay if an employee is required to work outside of their contracted hours, and when staff can expect to be paid.

Your policy on paid leave, sickness procedures, and unapproved time off should be discussed. As a minimum legal requirement, 5.6 working weeks for all employees, or 28 days, of paid leave must be offered to full-time employees. Whether or not you choose to include bank holidays in this number is at your discretion, as is whether or not you choose to offer more time off than the legal minimum.

After 4 days of sickness, staff are entitled to statutory sick pay until they’re well enough to work (although these 3 ‘waiting days’ do not apply where someone is unfit for work due to coronavirus – please see our Sick Pay factsheet on the FSB Legal Hub). Detailing your sickness reporting procedure will help keep things running smoothly.

Benefits and pension

While the salary before tax must equate to at least the National Minimum Wage, there may be things your business offers that can be provided through salary deductions.

The main thing to detail is information on your workplace pension scheme. Though the employee has the right to opt out, you must inform them of the provider and the details of the scheme you have. Please see our factsheet on Pensions- Automatic Workplace Enrolment on the FSB Legal Hub.

How FSB can help

When you’re running a business, making sure you’ve got all your bases covered legally can be time-consuming, especially as we navigate difficult times. FSB members have 24/7 access to our FSB Legal Hub and employment protection service, which is home to a wealth of guides and documents to help you stay legally compliant.



 

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