Advice for employers or employees who wish to vary the terms of an employment contract?

The terms of an employment contract set out what an employee and an employer can expect from each other. Once agreed upon, the terms of this binding employment contract remain valid for as long as the contract remains in place. However, sometimes circumstances dictate that there needs to be a change to the terms of the original employment contract: these changes can be instigated by either party. Contractual variations to an existing employment contract are only legally binding with the agreement of both parties. But why would either an employer or employee want to vary the terms of their contracts, and how can these changes be legally effected?

Why would either party to an employment contract wish to vary the original terms?

An employer may wish to vary the terms of the contract because ofchanged economic circumstances or due to a reorganisation of thebusiness. There are numerous possible areas of change, but the most common revolve around rates of pay, hours or daysworked, duties, supervisory relationships or place of work. An employee may seek to vary the terms of the employment contract to bring about improvementsin pay or working conditions: they may request additionalholidays, or to change the conditions so that they are more suitable for their particular circumstances, like requesting a change from full-time to part-time working because of  increased domestic responsibilities.

How can employment contracts be varied?

• An existing employment contract can be varied only with the agreement of both parties. Changes may be agreed on an individual basis, or through a collective agreement: in other words, an agreement between the employer and employee or their representative.

• An employer who is proposing to change an employee’s employment contract should fully consult with that employee or his or her representative, and explain and discuss any reasons for change.

• Variations of contract can be agreed verbally or in writing. It is preferable for any agreed changes to be recorded in writing.

• Where a variation in the employment contract has been agreed and the changes concern particulars which must be included in the written statement of terms and conditions, the employer should give written notification of these changes to the employee, within a month of the changes taking effect.

In what circumstances can an existing contract authorise changes in the employee’s working conditions?

• A contract may contain express terms which allow an employer to make changes in working conditions. Through flexibility clauses, for example, an employer may expressly reserve the right to alter the employee’s duties. The contract may therefore be drafted to permit reasonable changes to be made within the terms of the existing agreement.

• Sometimes tribunals and courts may consider that the contract contains implied terms which may authorise or prevent alterations of working conditions. For instance, it would be usual for an employee to be expected to work within reasonable daily travelling distance of his or her home.

Can an individual employment contract be varied by a collective agreement?

A contract of employment is in law an agreement between an employer and an individual employee. Therefore, any variations in the contract will need that individual’s express agreement. However, an employer and employee can agree, either expressly through a clause or reference in the employee’s contract, or through an implied term, that relevant changes in terms and conditions negotiated by a trade union(s) are incorporated into individual employees’ contracts. This may still be the case whether or not the employee is an active member of the relevant trade union(s).