Changing Contract Terms & Conditions

Changing Contract Terms & Conditions

In this article, our Senior HR Advisor, Claire McGuinness, offers advice to employers changing employee contract terms and conditions

When employers need to change terms and conditions for their employees, this can cause practical difficulties.  So what if some employees don’t agree? Can an employee refuse to sign and can they sue you if you dismiss them?

ACAS has recently published advice to help employers avoid ‘fire and rehire’ practices. To help employers explore alternative options for introducing changes to staff contracts before considering ‘firing and rehiring’ employees.

The conciliation body said that fire and rehire is an “extreme step” that can damage staff morale, productivity and working relations, and could also lead to industrial action and reputational damage.  ACAS guidance urges employers to enter into constructive discussions about any changes they propose before forcing employees to sign new contracts.  It also offers advice around what to do if an organisation is unable to reach a consensus with employees or trade union representatives.

ACAS Chief Executive, Susan Clews, said “The new advice is clear that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations. Employers should thoroughly explore all other options first and make every effort to reach an agreement with staff on any contract changes.  Organisations that consult with their workforce in a genuine and meaningful way about proposed changes can help prevent conflict at work and stay within the law.”

Why change might be needed?

Employers may want to make sure contracts are up to date with new laws or regulations.  Or if someone’s job role has changed and their contract needs to reflect the change.  They may want to introduce new terms and conditions, e.g contractual redundancy pay or enhanced maternity, paternity, parental or adoption leave and pay.

While in some circumstances changing an employment contract can bring benefits to an organisation and its employees, it can also bring significant risks. Employers should think carefully about the best way to address any issues they’re trying to solve.

What Risks should Employers consider?

Changing contracts can sometimes cause tensions in an organisation. If changes are not managed well then risks may include damaging working relations, legal claims, e.g claims of breach of contract or constructive dismissal, increased levels of stress or absence or unlawful discrimination, i.e if changes are introduced that apply to a group of employees but put employees with a certain ‘protected characteristic’ at a disadvantage.

Proposing Contract Change & Consultation

When employers are proposing employment contract changes, they must inform all affected employees and workers and any relevant employee representatives.  Employees must be informed about what the proposed changes are and who might be affected.  Also the timeframe for the proposed changes and any other options that have been considered.  Employers also need to include anyone who is absent from the business. 

Discuss the business’ view on how the changes could benefit employees and how the business will be affected if you do not make the changes.  The consultation process will be an opportunity for employers to consider any question, suggestions or concerns.

Once consultations are complete and employment contract changes are agreed upon, employers should put any changes in writing making sure everyone is clear about the details of the changes.

If employment contract changes cannot be agreed

In June ACAS published the results of a fact-finding exercise into the use of “fire and rehire” – where organisations dismiss staff and then re-employ them on, usually, less favourable terms.  It found that some organisations felt fire and rehire was reasonable when used as a last resort – for example, where the alternative option was business insolvency – while others suggested the practice is rarely, if ever, justifiable and should be prohibited.

Although it can sometimes feel difficult and time-consuming to reach an agreement on a contract change, it’s important to remember there will always be benefits for everyone involved if you do reach an agreement as well as significant risks if employers try to change a contract without agreement.

So what are the risks of contract change?

Legal claims, e.g claims of breach of contract or constructive dismissal, damaging morale and good working relations, strikes or other industrial action if there’s a trade union and reputational damage to the business or brand.

What if you still can’t reach agreement?

If you have consulted with employees and employee representatives and have not yet been able to reach an agreement, you should continue to explore all options for as long as is reasonably possible. Continue to ask questions and listen to answers – taking time to understand other people’s views can help you find common ground. 

If you impose a change to a contract before getting an agreement you will be breaking the agreed contract (‘in breach of contract’).

Fire & Rehiring

You should only consider dismissing and offering to rehire someone on new terms as a last resort. Before doing this, you must have made all reasonable attempts to reach an agreement through a full and thorough consultation. It’s important to consider that by ending the employee’s original contract of employment you will be dismissing them. So you must have a fair reason for dismissal, follow a fair dismissal process, provide the correct amount of notice and offer the employee the right of appeal against their dismissal.

If you have any Health and Safety concerns or would like to discuss anything further, please get in contact with the HPC team today.

T: 0844 800 5932


Twitter: @HPC_HRServices

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