It is possible to effect a change in an employee’s contractual arrangements, says Bob Patchett, provided you take your time, you recognise the concept of the employment contract, and you understand what the law says about it.

Contract of employment

A contract of employment is an arrangement whereby one party works for the other in return for wages. To be legally enforceable, it must contain three elements

  • an offer

  • acceptance of that offer

  • a reward whereby each party derives benefit.

For example, the employer offers a job (offer), the person is to work in return for a wage (reward), and the person accepts (acceptance). These arrangements must be sufficiently clear and there must be an intention for them to be legally binding, though these usually are taken for granted in the contract of employment.

However, you need to recognise two crucial points. First, the contract need not be in writing to be enforceable. The common law of contract, just outlined, was formed when most people could neither read nor write. This means that if a job is offered and accepted orally, then it is binding even though not committed to writing. The law does not call for a written contract, but it requires you to set out certain of its terms in a written statement. Clearly, you should put pen to paper as soon as possible, or make the offer in writing and have the candidate sign his or her acceptance. Moreover, any offer made to an existing employee, for example, “clear out that storeroom before Monday and you can have an extra day’s holiday”, which the employee accepts by doing so, must be honoured, so you are contractually obliged to give the holiday. Remind your managers to remember this if they make promises to their employees in order to get work done.

Either party may end the contract of employment by giving the greater of the contractual or statutory notice. So it requires two people to make a contract but only one to end it. The second crucial point therefore is that one party alone cannot, in law, vary a contract because doing so would constitute breach of contract. If you tell an employee that you are changing his or her contract and the person refuses to accept the change, he or she can take you to court for breach of contract and the court will either force you to maintain the contract in its original form or, if the employee has decided to leave, will award damages against you.

Varying the contract

So much for the warnings, now how can you vary a contractual arrangement? There are three ways; the first is to use persuasion. Approach the individual or employees affected, explain your problem then tell them how a variation to their contract would help resolve it. You may be lucky and find them immediately willing to accept the change. However, what is more likely is that they will ask for time to consider your proposal, talk it over with family or seek advice. You need to allow this. They may come back with a counter proposal in which case you should not respond negatively right away but instead make a note, take it away, consider it and then go back to them with your response. This process could be repeated several times until an agreement is reached. If you attempt to rush your employees, any opposition is likely to harden. Also be prepared to recognise that your employees may come up with a counter proposal that suits them better but still gives you what you want. Your employees may be more perceptive than you assume, and they have first-hand workplace knowledge.

If you reach agreement in this way, then you need to confirm the new contractual arrangements in writing, either by giving each employee a note of the change or by issuing a completely new contract depending on the number and complexity of changes.

The second technique for dealing with the problem is negotiation. This is not unlike the previous approach, though is more formal, and you may employ it if, traditionally, you negotiate terms and conditions of employment with your whole workforce, with their elected representatives, or with one or more trade unions. As before, explain your problem and lay your proposals on the table. Certainly, if you are dealing with representatives, they will need to put your proposals to their members, and more than likely you will again find yourself in a series of meetings, listening to your employees' responses, considering them, and going back with your own replies.

If you subsequently reach agreement, again confirm the change in writing to each employee.

If neither of these approaches results in a satisfactory outcome for you, take time to consider your next move. You can, in effect, force a variation to your employees’ contracts. However, you should bear in mind that if, after a lot of discussion, they have refused to come to an agreement with you, any coercion is likely at best to sour your relations with your staff and at worst result in a strike or their permanent exodus from the organisation. So ask yourself whether it is worth the disruption and bad feeling to get the changes you want, and whether there really is a strong business reason for the required change.

Assuming you wish to follow this path, you must explain your needs to the people affected either directly or through their representatives, listen to and consider their comments and give them your reply, which may include a different proposal. Allow them time to consider what you have said and take advice. A good guide is to allow them the same period for these discussions as that required for redundancy, ie 45 days if 100 or more employees are affected or 30 days for a lesser number. Continue discussions for these periods of time or until meaningful talking has ended. You should then write to each employee affected stating that their current contract will terminate — not change — at the end of their due notice but that you are offering continued employment on the new contractual terms. If they subsequently stay but sue you for breach of contract, or leave and claim constructive dismissal, the court will consider whether you consulted adequately and then gave appropriate notice and, most important, whether you have a sound business reason for the change. If the change was for administrative convenience you are likely to lose the case, but if, for example, you show that survival of the business is at stake, you are more likely to win.

This third approach is definitely hard-man stuff but is risky and injurious to employee relations, the soft approach is much better. Keep your employees informed at all times, explain your problem and listen sympathetically to their responses and problems. It takes time, but is the best way to get what you want. And you will sleep better.

Last reviewed 20 April 2015