Over the last six months, all businesses have had to make decisions about the way in which they deal with their employees given the impact of Covid-19. Measures will have been put in place to put people on furlough, to adjust to people working from home and to implement cost saving measures such as temporary pay reductions.
However, as we begin to emerge from the restrictions which were imposed and some businesses start to try to return to normal, it is important to remind ourselves of what is legally permitted in terms of contractual changes.
Businesses may need to consider making some of the temporary changes they have in place permanent or may need to look at other changes to the way in which people work. The first place for business to start is to consider what is in their contracts of employment and will this need to be varied to meet the ongoing business need and whether these changes can be agreed with their employees. For example:
Place of work – will employees continue to work from home in the long term and if so will this affect the place of work stated in their contract of employment;
Pay reductions – will any of the temporary measures put in place need to be made permanent given the ongoing struggle businesses face;
Annual leave – will more flexibility need to be added to allow contractual holiday to be carried into subsequent leave years; and
Benefits – can the business still offer the same level of benefits it was offering, or will changes need to be made to employees’ benefits packages.
These can all be difficult issues to approach and any changes will need to be carefully planned. These plans will vary from business to business, taking into account all sorts of factors including the number of employees involved and the types of changes being made. The most important questions a business will need to ask at the outset of any programme of change will be:
What does the contract currently say?
What do we want to change?
When do we want the change to take effect?
Who will be affected?
And possibly the most important question of all – why are we making these changes?
The answers to these questions will then help to shape the plan for how your business can go about making these changes.
With the risks of wide ranging employment claims being issued and losing valuable members of staff if this is handled wrong, it is always best to consider these questions as much in advance as possible and to establish a detailed plan before taking any steps to make the changes. In doing so, you stand the best chance of being able to work with employees through individual or collective consultation (as necessary) to reach the best outcome for them and for the business by agreement.
If it is not possible to reach agreement with employees about the new terms, businesses may need to undertake further consultation with employees. Ultimately, if agreement cannot be reached following appropriate consultation which may include collective consultation, businesses may need to consider their options to get the changes made. Options for businesses are:
Imposing terms on affected employees;
Terminating employment on notice and re-engaging on the new terms; or
Relying on an existing flexibility clause in the contract (if there is one).
Each of these options comes with the risk of unfair dismissal, constructive dismissal and breach of contract claims. In certain circumstances employees may also have claims for unlawful deduction from wages and discrimination. These serious risks highlight the need to ensure that any change to contractual terms is implemented by following a fair process.
With everything that has happened this year, it is sometimes easy to forget the basics and so taking the time to ensure that all employment contracts are up to date and amended where necessary is vitally important.
To listen to our recent webinar about changing terms and conditions, click here
Should you require any assistance in preparing for, consulting on or implementing a change to your employment contracts, please contact our employment team by email on [email protected]
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.