I wonder how I can lawfully change my employees' terms and conditions of employment?

Changes to roles, pay, working patterns or business priorities can mean employment contracts need updating. Contractual changes can support clarity, competitiveness and smoother workforce planning. However, if handled incorrectly, they can create legal claims, damage morale and disrupt day-to-day operations.

This guide explains the lawful routes to changing terms and conditions of employment, when consultation is needed, and the risks of imposing changes without agreement or using dismissal and re-engagement.

What does the law say about changing contract terms?

An employment contract can usually only be varied in line with its own terms or by agreement between the employer and employee. Some contracts include a variation or flexibility clause, which may allow certain changes without fresh express agreement. Even then, any change should be reasonable, clearly communicated and handled carefully.

If there is no suitable clause, employers generally have three options:

• Seek the employee’s express agreement: Ideally, the employer should obtain written confirmation that the employee accepts the proposed change. This is usually the clearest and lowest-risk route.
   
• Unilaterally impose the change: An employer may try to apply the change without agreement and rely on the employee’s conduct as implied acceptance. This carries significant risk and should be approached with caution.
   
• Use dismissal and re-engagement: Often described as “fire and rehire”, this involves dismissing an employee and offering re-engagement on new terms. Employers must follow the Statutory Code of Practice on Dismissal and Re-engagement, and failure to do so may increase tribunal awards in relevant claims.

What are the risks of changing terms without agreement?

Changing employment terms without consent or a fair process can create legal, operational and reputational exposure. Key risks include:

• Breach of contract: Imposing changes without consent may amount to breach of contract.
   
• Constructive dismissal: Employees may resign and claim constructive dismissal if fundamental terms are imposed unilaterally.
   
• Unfair dismissal: Dismissal and re-engagement may lead to unfair dismissal claims if there is no fair reason or a proper process is not followed. Non-compliance with the Statutory Code can also affect compensation in relevant cases.
   
• Employee relations and reputation: Poorly handled change can damage trust, morale, retention and wider workforce relations.

What process should employers follow?

A fair process will depend on the scale and impact of the proposed change. In broad terms, employers should take the following steps before implementing new terms:

1. Decide whether individual or collective consultation is needed. Consider how many employees are affected and whether collective redundancy consultation obligations may be triggered if 20 or more employees refuse the change.
    
2. Explain the proposed contractual changes. Set out the reasons for the change, the scope, the timing and the practical impact. Provide draft revised contracts or written variations where appropriate.
    
3. Consult meaningfully. Invite feedback, note objections, answer questions and give every affected employee a fair opportunity to comment. Consultation should be genuine rather than a tick-box exercise.
    
4. Review employee feedback. Assess whether the proposals can be modified, softened, phased or reframed to address concerns while still meeting the business objective.
    
5. Hold further consultation if needed. Respond to previous feedback, consider written representations and, where appropriate, explain that dismissal and re-engagement may become necessary. Employers should take specialist advice before raising dismissal explicitly.
    
6. Re-examine the proposals. Consider reasonable alternatives, the impact on different employee groups and whether the same business aim could be achieved through less disruptive means.
    
7. Confirm the final position in writing. Write to employees with the final proposed changes and set a clear deadline for written agreement or confirmation of refusal.
    
8. Meet individually if agreement is not reached. If an employee refuses, hold an individual meeting to discuss their position, explain the potential termination and re-engagement process, allow them to be accompanied and give them the chance to make representations.

If employees agree to the change, the employer must give written notice within one month of the proposed change.

Summary

Changing terms and conditions should be approached carefully, transparently and with agreement wherever possible. Employers who explain the business reasons, consult properly, consider feedback and document each stage are better placed to reduce legal risk and maintain trust.

Unilateral changes, or dismissal and re-engagement, should only be considered as a last resort and in line with the Statutory Code.

A fair, structured process helps employers make necessary contractual changes while protecting employee relations and minimising the risk of claims.

Further Advice

If you have any queries on this topic or any other employment-related matters, our Peace of Mind Team is here to provide expert guidance. Our Document Audit Team can also help draft relevant workplace policies.

Contact our Employment Team by emailing employment@warnergoodman.co.uk or calling 023 8071 7717.