Employment contracts are legally binding agreements. An employer cannot simply impose changes to terms and conditions — doing so without the employee's consent is a breach of contract and could give rise to claims including constructive dismissal. However, there are lawful routes to making changes when business needs evolve.
When Can Changes Be Made?
By Agreement
The simplest and safest route is to obtain the employee's written consent to the change. This involves explaining the business reasons, consulting with the employee (and their representatives if applicable), and issuing an updated contract or variation letter once agreement is reached.
Using a Flexibility Clause
Some contracts include flexibility or variation clauses that allow the employer to make reasonable changes to certain terms — for example, requiring the employee to work at different locations. However, these clauses must be drafted carefully and cannot be used to make fundamental changes to pay, hours, or role without consultation.
Dismissal and Re-engagement (Fire and Rehire)
As a last resort, an employer can terminate the existing contract and offer re-engagement on new terms. This is legally high-risk and subject to increasing scrutiny. The Employment Rights Bill is set to impose significant new restrictions on this practice, including making it automatically unfair dismissal in many circumstances.
The Correct Process
- Identify the business reason — there must be a genuine, legitimate reason for the change
- Consult meaningfully — explain the reasons, listen to concerns, and explore alternatives
- Allow reasonable time — employees need time to consider the proposals
- Confirm in writing — issue a contract variation letter or new contract
- Consider collective consultation — if the change affects 20+ employees, collective consultation obligations may apply
Risks of Getting It Wrong
- Breach of contract — the employee can claim damages
- Constructive dismissal — the employee resigns and claims they were forced out by a fundamental breach
- Unfair dismissal — if the employee is dismissed for refusing to accept the change
Changing contract terms requires careful handling. Our employment law specialists can guide you through the process and minimise your legal risk. Get advice today.