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Wednesday, 6 July 2016

Changing Terms of Employment Properly

Tablets of StoneAll your employees have written terms of employment, right? Everyone should have one within 2 calendar months of starting work with you. (If not contact us of course)

But they aren’t written in tablets of stone, and over time in any business some of the terms of the employment relationship will need to be changed. Perhaps to reflect changes to the wider business environment, perhaps to tighten up any rules because you can forsee problems – or perhaps to be more generous by improving benefits. How do you go about making the change smoothly and properly?

It depends on the terms you’re changing.

Some changes will be accepted without question and cause no problems. For example, if you’re awarding a pay rise or changing a job title when someone is promoted, simply tell the person about the changes face-to-face in a confidential setting and confirm it in writing with a short letter. Include the effective date of change and the sentence “The other terms of your employment remain unchanged”. End of.

If you’re making any other significant changes to contractual terms, it’s essential that you can show that you’ve acted reasonably as an employer, both to head off legal problems and also to keep your employees on-side. The Human Resource provides tactical and strategic support to employers handling these situations. This will include:

  • Follow a proper consultative process. Clearly explain the changes you’re considering and the reasons to the affected employees. You could communicate this at a group meeting with the details confirmed in a follow up by email, and give people an open door opportunity to discuss issues on a one-to-one basis with you. Listen to what is raised and demonstrate you’ve taken it on board. If you meet objections or even outright rejection of the change, listen to the reasons and make some concessions where it’s reasonable. Assess the impact of the change on the employees and consider them carefully.
  • Ensure you can justify the change and the selection of the individuals whose terms are to change.
  • Give people time to adjust to the change and help them to make the adjustment. For any significant change, three months is usually considered reasonable notice.
  • Ensure you have a good reason for exercising your power to change a contractual term, considering any problems or difficulties it may cause the employee. Look especially sensitively at any reduction in pay or benefits.

If you aren’t able to obtain consent, you could impose the contractual change anyway, but the employee can:

  • Stand and sue, i.e. work under protest and claim breach of contract. If the change involves pay there could also be a claim for unlawful deduction from wages.
  • Resign and claim for constructive dismissal.

In the last resort, you could turn to the nuclear option that health minister Jeremy Hunt was considering to resolve the dispute with the junior hospital doctors’ contracts. This means terminating the contracts of employees who won’t agree to the change by giving them notice and immediately offering them re-engagement on new terms and conditions. Such a drastic course of action will have an irrevocable impact on the trust between employee and employer, but in some circumstances it may be your only option and worth the legal risks and damage to morale.