Changing an employment contract: 5 things to consider

Employment contracts are the foundations of most work conducted in the UK. Whether your workers are full-time and permanent or fixed term, the written rules are very important.

When a business is going through a period of change, altering contracts is one of the earliest admin tasks to tackle. You might be reducing hours across the business or altering a single job title – either way, there are strict rules about consultation and negotiation.

Importantly, there are also business risks if you don’t manage change effectively. HR best practice means using great management skills to continue getting the most from your people.

In this post we explore the themes from our recent webinar looking into changing the terms and conditions of employment contracts.

The existing contract terms

There are many reasons to change an employment contract: to account for seismic operational changes or to mark out promotional pathways. Whatever the situation, first take some time to understand the existing contract and its terms.

Many terms are explicit – such as working hours, pay, location and any waivers. Others may be implied but they’re still legally binding.

‘Custom’ or ‘practice’ arrangements can become important when changing an employment contract. These mean an employee who has held a specific working pattern for more than one year could argue this has been absorbed into his or her contract. So, there is more to consider than what is outlined in black and white.

Your business case for change

Changing a contract of employment can be an unpredictable task. Sometimes, employees initiate the change. Or, perhaps difficult times mean a business needs to cut costs by changing business premises.

Many companies can benefit from streamlining their terms and benefits across the organisation too. Whatever your reason, prepare a solid business case. This should read with clarity and should, where possible, foresee any employee resistance.

If you are streamlining the company sick pay package, explain why this is necessary. Does it prevent redundancies? Will the business expand, opening up pathways for promotion? The best business case documents will even convince employees who may initially oppose the changes.

The consultation period

Your consultation period should be meaningful, so never presume you will be able to implement changes immediately. Even when you think a change will be waved through, don’t presume your proposals will suit everyone who is affected.

Allow several weeks for the consultation process so there is enough time for discussion. Always account for the cost of consulting before making plans for change.

Your obligations as an employer are set out by the Trade Union and Labour Relations (Consolidation) Act 1992. But, it is a good idea to go beyond these by adopting a positive approach defined by three-way communication. Be open to the suggestions of employees and trade union or elected representatives, too. They often submit good ideas that can help to build a resolution.

Naturally, your consultation period may involve negotiations. Meet with key stakeholders to decide which terms are negotiable – and which aren’t – to speed up the process from the beginning.

Managing the aftermath

When a conclusion is reached, you’ll need to announce the outcome. Confirm the change in writing within one month but also consider making a public announcement to remove any ambiguity.

If your consultation period does not end in agreement, the aftermath can be more difficult to negotiate. You can still go ahead with your changes, but weigh the risks against the benefits. Never underestimate how dips in staff morale can tarnish your bottom line.

To enforce a change, serve notice on current contracts and outline the terms and conditions you plan to change. Refusal to accept the changes will result in dismissal – which can expose a business to tribunal claims.

Each of these scenarios requires effective leadership, including the soft skills to deliver difficult messages and maintain unity in turbulent times. Our eBook, How to equip your managers to support HR, provides a crash course in how line managers can make difficult processes easier.

Remember to prioritise the wellbeing of your people. Making savings is important, but you should try hard to avoid tunnel vision. Different people react in different ways, so ensure mental health first aiders are available.

Our 2018 Mental Health Report linked mental ill health to absence-related costs – especially in businesses that don’t take a proactive approach. Change can cause stress, so it is important to manage this well. Work to maintain or rebuild a healthy workplace culture so you don’t face costs down the line.

The legal risks

Navigating contract law may seem like a minefield, but with the right assistance any company can stay on the right side of the law.

Unfair dismissal claims may arise if you cannot reach an agreement and need to terminate a contract. In this case, the tribunal will decide if there was a genuine need for dismissal – so get your business case straight beforehand. The average award for unfair dismissal is now more than £15,000.

Your business could also expose itself to claims of failure to inform and consult or a breach of contract. This means it is important to be open and specific with all details.

Do you need help with changing a contract? Watch our webinar for exclusive tips or contact us to find out how we can support your business.