Amending contracts of employment

With the appearance of more employment legislation every year it has become necessary to issue new contacts of employment almost routinely.  These notes are designed to smooth the way and minimise the time needed to deal with amending contracts of employment.

When do you need to alter the employment contract?

            New legislation often requires changes to existing employment contracts.  However, it would be a mistake to assume that every new regulation requires this.  Many regulations put new obligations on you as an employer, perhaps requiring you to change your employment policies, but do not require any change to you contracts.

What is a contract?

The word “contract” means the same as “agreement”.  Quite simply, it records the terms that two (or more) people have agreed.  The law refers to the necessity for an employer to hand to an employee within two months of the start of the employment, a “statement of particulars” of the employment.  It is satisfied by a letter or a contract provided before the employment commences, or at any time during the first 2 months of the employment.  However, it is much better practice to present a draft contract to a new employee when the job offer is made.  Simply handing your new employee a list of required terms does no more than satisfy your legal obligation.  If you want to protect your interests too, then set out the terms in a contract to which your employee is bound by their signature.

Why can’t I just change the contracts for all staff?

It might seem tempting to try!  But a contract is a two-way deal.  What we propose here is a simple and efficient procedure that will enable you to take your staff with you and avoid any problems later. 

Which staff might need new contracts?

Most new legislation now applies to all staff.  However, it is sensible to check and be certain that it does apply to your staff, before you worry about changing their contracts of employment.

Can I change other features at the same time?

What you change is for you to decide.  New regulations may make some change of employment contract compulsory.  There is no reason why you should not make other amends to an employment contract at the same time.  But do not imagine you can use the regulations as an excuse to “sneak in by the back door” and make amends to an employment contract, which may not benefit your employee.  If you do not have the positive agreement of your employee, then the new version is void because agreement is the essence of a contract.  We strongly advise that any change to an employment contract you propose should be thoroughly explained.

If your employment contract forms have been in use for more than a couple of years, it may be better to start afresh with clean modern versions than to amend old ones on numerous occasions, just like you might with a car.

How should I approach staff?

Again, the important point is to make sure the employee is aware of the impact of the change you propose and accepts it.  A signature may not be enough before a tribunal later if someone says they did not understand what they were asked to sign. Your approach really does depend on your relationship with individual staff members.  Here is our proposal for a small to medium sized business, employing say 20 to 200 people with no union agreement.

• Start with directors and managers.  Meet and explain the proposals of the contract amendments, particularly that the new requirement applies to directors too.
• When you are agreed, publish the new model contract on the company intranet and provide an opportunity for all staff to make comments, perhaps anonymously.  Introduce it positively and stress that the law compels you to make the changes (so far as it does so).
• Make any amendments you think may be necessary, and then hold a staff meeting, all together or by department, to explain areas where there has been misunderstanding.  If you do not arrange the meeting quickly, you may find much time is lost in informal staff debate about your proposals.
• Have the senior management team sign to their contracts (which may be in different form).
• Write individual but identical letters to all other staff summarising the changes and confirming why they are necessary.  Provide an opportunity for one-to-one meetings with any who want more information or who have special requirements.  Beware of making exceptions, which could open the door to wider disagreement.  Ask for the return of signed contracts within 3 days.
• Collect the contracts. Check that each has been signed and dated.

What about central bargaining?

If the central negotiations in the past have included contract terms, then you may be able to negotiate these changes centrally.  It will still be good practice to hand a copy of the new terms to each employee.

What if an employee refuses to sign the new contract?

Provided the new agreement contains no changes other than new legal provisions, we take the view that you are within your rights simply to hand or post a copy to that staff member, explaining that it constitutes a change to the particulars of his employment.

If however, you have suggested additional changes too, then your position is entirely different.  You must decide how important the changes are to you and whether they are such that they affect the contract  - your contract  - fundamentally.  If you have failed to persuade your employee that the changes are in the best interests of the company, and are reasonable, then you must choose the level of persuasion you are prepared to apply.  If the change you propose is substantial, it is likely that your employee will succeed in a claim before an employment tribunal.   Each case will depend on its own facts, but you should avoid placing your employee in a position of “take it or leave it”.  Negotiate as far as you can.  Be reasonable.  Look for alternatives. While every case depends on its own facts, it is unlikely that you would fail to defend the tribunal case successfully if you proposals were reasonable.

Remember

The only other point is to remind you that the new law covers absolutely all employees, even directors; so you may need to look at directors’ service agreements too.  If you were previously exempt from many regulations, because you employed fewer than 20 staff, you are no longer exempt from any of the provisions of the Employment Act 2002.  You may therefore have to make more changes than those we may have mentioned above.

Where can I get model contracts?

From Net Lawman - of course! Go to the employment section of the Document Centre.