- Making Contractual Changes
In our article on “Change Management and the Management of Change” we referred to times when an organisation needs to make a fundamental change that is likely to affect a contract of employment or alter the “statement of written particulars of employment”.
This is most likely going to be a legal requirement, or there will at least be an element of employment law within the process.
To begin with, let’s go back to fundamentals and look at the nature of a contract and a statement.
A Contract of Employment doesn’t necessarily have to be in writing, it can be verbal, but the provability of who said what mean that putting the details in writing is by far the most sensible way.
Both a contract and a statement must contain the following:
- The employer’s name and address
- The employee’s details – name, job title, start date
- Salary including payment intervals
- Holiday entitlement
- Notice periods
- Any applicable collective agreements
There will be many other details containing pertinent information, but these can be in the Company handbook and policy documents. These can include sickness and sick pay, disciplinary and grievance procedures, restrictive covenants, expenses policy and many more. It’s up to each Company what it includes in the contract or statement, but anything that goes in is legally binding. Policies and procedures can include the right to amend or change.
This aspect of flexibility is often included in the contract, but remember that if this becomes a legal matter, interpretation of the extent of the flexibility by Tribunals can be narrow. This has been tested at Tribunal and it was found that a right to make changes by notifying employees did not constitute a right to make unilateral changes to the contract.[1]
There are three types of clause within a contract or statement of terms and conditions of employment:
- Express – as written in the document
- Implied – where it’s so obvious that it doesn’t need saying e.g. The employer’s duty to provide a safe working environment. This is also where “custom and practice” comes in
- Statutory – e.g. paying at least the legal minimum wage. No agreement to pay less, even in a mutually signed contract would ever be upheld in law
What are the circumstances that might lead to the need to make changes to the contract of employment?
These would be issues such as the need to re-organise the business because of economic, technical or organisational (ETO) circumstances. Or there might be the need to harmonise terms and conditions across different teams within the business. If an employee wishes to have a change to his or her contract, this might be because of a wish to change from full to part time or vice versa, due to domestic responsibilities. If such matters cause a change in contractual obligations, such as pay and working hours, then there is a process to follow, to ensure that both sides are happy with the change and it can be implemented without aggravation.
Going back to the question of built-in contractual flexibility, does this mean that if there is such a clause then the organisation can impose the change without agreement but with the stated period of notice? The answer is no. To make a contractual change there will always be a need to consult. Beware – making changes without consultation could be a breach of contract. This could end up with a case for constructive dismissal with accompanying damages.
Of course there is the odd occasion where a change can be made without consultation, such as a pay rise. In such a case, a letter to the employee informing them of the new pay will be sufficient. However, this is an exception.
But this consultation doesn’t have to be formal, or at least not at the start of the process. Starting informally, giving the reasons for the change means that the affected employees will at least know, and hopefully understand and support the reasons for the need to change. They are likely to be more receptive if they can hear and have the opportunity to make comments, express views and maybe offer suggestions on aspects of the change. This should make the process smoother and unified. And ensuring that if there are changes to a role, then putting adequate training in place will lessen any anxiety that might be felt about new responsibilities and skills.
Where to Start?
We would always suggest that any organisation intending to make a contractual change has asked itself the question: Is this Really Necessary? Changing contractual terms involves a longish process, that can be disruptive and distracting and therefore a cost to the business. Does the benefit really outweigh the problem? Is there another way? Are there other options? If the only answer is that the change must be made, then the process should begin. If it’s a fairly straightforward, single change, it should be possible to accomplish this within 6 – 8 weeks.
If it’s possible, gathering your staff together and giving them a well thought out presentation that points out the advantages for the both the Company and themselves is a good start. And they should also have the opportunity to ask any questions that occur to them. But be aware that after this meeting the official start of the consultation period is deemed to begin.
This meeting should then be followed up with a letter confirming what you said, possibly copying in a link to the presentation if that’s feasible, and outlining a process and a timetable, including the expected length of the consultation period, which we suggest should be a total of 30 days, in line with the likely contractual clause for making changes (you should check this aspect of your contract or Statement of Terms and Conditions before including this information). When you set the timetable, remember what may be up and coming at the time of year and take account of annual holidays and any Christmas/New Year shut down. If this is the case, then you can either extend the consultation period, or move the start date to exclude these periods of absence. And don’t forget people who are on leave for any other reason, such as long-term sickness, maternity, paternity and parental leave. They must also be included and access to them is more likely to be on a 1-1 basis.
Keeping an open line of communication is vital at this stage, as is keeping the timetable short and dynamic.
Often there will be staff who don’t want to speak up in front of others but may have a burning question. The next step is to organise 1-1 meetings as quickly as possible. As the consultation period has deemed to have begun following the group meeting, don’t leave it too long before organising these individual meetings. A contract is between an employer and an employee. Changes have to be agreed on an individual basis. Even if the group appears to agree, you cannot assume that you can go ahead with the changes without the individual meetings.
These 1-1 meetings should also be recorded. A standard template is useful because, as well as gathering all of the relevant information, it also shows that everyone was treated equally.
You may find that most of your staff are happy with the change and don’t need any further meetings. If this is the case, then you can close the consultation with that individual. But remember to have him or her sign the template sheet to confirm that they are satisfied with the consultation and accept the changes.
But what if it doesn’t go well?
If the changes are disliked by all the staff, then refer back to the original question: Is this change really necessary? Are there alternatives? In such a case, listen to what the staff have to say. They may well pinpoint an issue that you hadn’t considered, which it may be possible to re-consider and apply in a different way. If, however, there are many and differing reasons, then listening to them is even more crucial. Their comments may be relevant to the change, or they may be nothing to do with it and this is an opportunity to air grievances. If this latter is the case, then you do have the option of suspending the consultation until you have sorted out what’s really going on. Why are so many of your staff so unhappy with what you perceived as a straightforward contract amendment? Dealing with grievances is a whole new issue and something we will deal with in another article.
If what you have, is one or two individuals who are unhappy and don’t want to change, again, listening to their reasons is vital. And look at their back story. These may be people who have TUPE transferred into your company and have retained their original terms and conditions and see this change as detrimental to them. Or they may simply be averse to change of any kind. Many people are just that.
What Options Do You Have?
If the reason is because of perceived loss, you may be able to negotiate an alternative or compromise such as an extra day’s holiday to remove regular overtime or a change of core hours. If you are able to give something back without a serious financial loss, then consider this in order to avoid further disruption.
If the person digs in their heels and refuses to consider any change, then your final option is to inform the employee that you will dismiss them on their old terms and immediately re-employ on the new contractual terms. But this really is the last option. You would have to be very certain that you can demonstrate that you did everything to reach a negotiation with the individual before taking this option.
If this happens to you, we would strongly suggest that you take professional advice before taking the step, although you can inform the employee that you may have to consider this option if you really cannot reach agreement.
But, all being well, this will not happen to you. Once you have all of the signed agreements, then you can and should issue the new contracts with immediate effect. The quicker people get used to working under the new terms, the less disruption there will be.
Petaurum Solutions recently undertook a project of change management that involved contractual amendments. You can read about it here.
And finally, we would advise that it’s
always worth running over your plans with an expert before setting off on any
journey that has legal implications.
Experts can spot pitfalls and help you avoid them, reducing your risk
and potentially lessening your financial outlay.
[1] Norman and Other v National Audit Office 2015