Changing Terms and Conditions of Employment
Learn When Changes Are Lawful, How To Consult Employees And The Risks Of Getting It Wrong
Changing terms and conditions of employment cannot normally be processed unilaterally by an employer. Whether the proposed change relates to pay, working hours, duties, benefits, location or another contractual term, employers must carefully consider both their legal obligations and the practical impact on employee relations. Whilst some contractual changes are straightforward and readily accepted, others can be contentious and, if handled poorly, may lead to grievances, breach of contract claims, constructive dismissal claims or even collective disputes.
This guide explains when employers can change terms and conditions of employment, how to consult employees effectively and the risks associated with imposing changes without agreement.
What Are Terms and Conditions of Employment?
Terms and conditions of employment are the rights, responsibilities and obligations that govern the employment relationship between an employer and employee. Together, they form the Contract of Employment and establish how the parties will work together throughout the course of employment.
Some contractual terms will be set out in writing, whilst others may be agreed verbally or implied by law. For a more detailed explanation of how employment contracts are formed and the different types of contractual terms, see our guide to Contracts of Employment.
Terms and conditions can be divided into two main categories:
- Express terms are terms that have been specifically agreed between the employer and employee. Examples include pay, working hours, place of work, holiday entitlement, notice periods and job duties. These terms may be recorded in writing or agreed verbally.
- Implied terms are terms that exist even though they have not been specifically discussed or written down. Some are implied by legislation and others have developed through case law. For example, employers and employees are subject to an implied duty of mutual trust and confidence.
It is important to remember that a contract of employment does not need to be in writing to be legally binding. Verbal agreements can create contractual obligations, which is why employers should take care when discussing changes to pay, hours, benefits or other employment terms.
Before making any changes to terms and conditions of employment, employers should first identify whether the proposed change affects a contractual term. If it does, consultation and employee agreement will often be required.
Can Employers Change Terms and Conditions of Employment?
Generally, no. Employers cannot simply decide to change contractual terms and impose those changes on employees.
A contract of employment is a legally binding agreement between the employer and employee. As with any other contract, the terms that have been agreed can usually only be changed if both parties agree to the change.
This principle is known as mutual agreement. In practice, this means that before changing an employee’s pay, working hours, place of work, benefits, job duties or any other contractual term, the employer should consult with the employee and seek their agreement to the proposed change.
Whilst some contracts contain flexibility clauses that allow employers to make certain changes, these clauses are interpreted narrowly by the courts and do not give employers unlimited discretion to alter contractual terms.
Where an employer makes changes without agreement, they may be in breach of contract. Depending on the circumstances, this could result in:
- Employee grievances;
- Breach of contract claims;
- Unlawful deduction from wages claims;
- Damage to employee relations and workplace morale; and
- In serious cases, constructive dismissal claims where an employee resigns in response to a fundamental breach of contract.
This does not mean contractual changes are impossible. Businesses often need to adapt to changing commercial circumstances, economic pressures, technological developments and new ways of working. However, employers should approach contractual changes carefully and follow a fair process that includes consultation, communication and, wherever possible, employee agreement.
Common Reasons Employers Want to Change Terms And Conditions
Businesses rarely seek to change terms and conditions of employment without a reason. In most cases, proposed changes arise because the organisation has evolved, operational requirements have changed or economic pressures require a different approach.
For SMEs in particular, the need to adapt quickly to changing circumstances can mean that employment contracts drafted several years ago no longer reflect the reality of how the business operates today.
Some of the most common reasons employers seek to change contractual terms include:
- Changes to working hours: businesses may need employees to start earlier, work different shifts, reduce hours during quieter periods or increase availability to meet customer demand.
- Hybrid and flexible working arrangements: following the shift towards remote and hybrid working, many employers have reviewed contractual provisions relating to workplace location, attendance requirements and working patterns.
- Relocation: employers may move premises, consolidate sites or introduce new working locations that require changes to place of work clauses.
- Restructuring and organisational change: growth, mergers, acquisitions or changes in business strategy may require employees to take on different responsibilities or report through different management structures.
- Changes to pay and benefits: employers may wish to amend bonus arrangements, commission schemes, allowances, pension contributions or other contractual benefits.
- Changes to duties and responsibilities: as businesses grow, roles often evolve. Employees may take on additional responsibilities, supervise staff or move into new positions that require contractual changes.
For example, a small business that originally employed office-based staff may later introduce hybrid working arrangements. Similarly, a growing company may outgrow its premises and relocate to a new site, requiring changes to employees’ place of work. In both situations, employers should consider whether the proposed changes affect contractual terms and, if they do, follow an appropriate consultation process.
Regardless of the reason for the proposed change, employers should be able to explain the business rationale clearly and demonstrate why the change is necessary. Employees are generally more willing to engage positively with change where the reasons are transparent and the process is handled fairly.
Changing Terms and Conditions of Employment By Agreement
The safest and most effective way to change terms and conditions of employment is by obtaining the employee’s agreement. This approach minimises legal risk, helps maintain positive employee relations and demonstrates that the employer has acted reasonably throughout the process.
Before seeking agreement, employers should consult with affected employees and explain the reasons for the proposed change. Consultation is not simply a process of informing employees what will happen; it should be a genuine discussion that gives employees an opportunity to ask questions, raise concerns and suggest alternative solutions.
The amount of consultation required will depend on the nature and significance of the proposed change. A minor amendment may require only a brief discussion, whereas substantial changes to pay, hours, location or benefits may require a more detailed consultation process.
During consultation, employers should clearly explain:
- The proposed change;
- The business reasons for the change;
- When the change is intended to take effect;
- Any impact on the employee; and
- Any alternatives that have been considered.
Where agreement is reached, the employee’s consent should be recorded in writing. This helps avoid misunderstandings and provides evidence that the change was accepted voluntarily.
Once agreement has been obtained, employers should issue written confirmation of the revised terms. This may take the form of a variation letter, an amended contract of employment or a new contract where extensive changes are being made.
Employers should avoid relying on verbal agreements alone. Whilst verbal agreements can be legally binding, written confirmation provides clarity for both parties and reduces the likelihood of future disputes about what was agreed and when the change took effect.
In many cases, employees will be willing to agree to contractual changes where the reasons are explained openly, the consultation process is handled fairly and sufficient notice is given before the changes are implemented.
The Importance of Consultation
Consultation is one of the most important parts of the process when proposing changes to terms and conditions of employment. Whilst consultation does not necessarily mean that employers must agree with every objection raised, it does require employers to engage with employees in a meaningful way before making decisions.
A well-managed consultation process can help secure employee agreement, reduce resistance to change and minimise the risk of disputes. Conversely, employees who feel that decisions have already been made without their input are often less willing to cooperate, even where the proposed changes are reasonable.
Explaining the Business Reasons
Employees are more likely to support contractual changes when they understand why they are being proposed. Employers should clearly explain the business reasons behind the change, whether these relate to commercial pressures, restructuring, growth, operational efficiency or changes in customer demand.
Providing a clear rationale helps build trust and demonstrates that the proposed changes are driven by genuine business needs rather than arbitrary management decisions.
Listening to Employee Concerns
Consultation should be a two-way process. Employees should be given an opportunity to ask questions, express concerns and explain how the proposed changes may affect them.
Some concerns may relate to practical issues such as childcare arrangements, travel commitments or financial implications. Taking time to understand these concerns can help identify solutions that might otherwise have been overlooked.
Considering Alternatives
Employers should keep an open mind during consultation and be prepared to consider alternative approaches where appropriate. Employees may suggest different ways of achieving the same business objective with less disruption or fewer adverse consequences.
Even where an alternative proposal is ultimately rejected, demonstrating that it was properly considered can help show that the consultation process was genuine and meaningful.
Documenting Discussions
Employers should keep clear records of consultation meetings, discussions and correspondence. These records should include the proposals discussed, concerns raised by employees, any alternatives considered and the outcomes of those discussions.
Good documentation provides evidence that consultation took place and can be invaluable if the employer later needs to demonstrate that a fair process was followed. It also helps ensure consistency where multiple employees are affected by the same proposed change.
Ultimately, consultation is not simply a legal requirement; it is a practical management tool that can improve communication, strengthen employee relations and increase the likelihood of reaching agreement on contractual changes.
Flexibility Clauses
Many employment contracts contain flexibility clauses that allow an employer to make certain changes to an employee’s terms and conditions without obtaining specific agreement on every occasion. These clauses are designed to provide employers with a degree of flexibility as business needs evolve.
Common examples of flexibility clauses include provisions allowing an employer to:
- Change an employee’s duties and responsibilities;
- Require employees to work from a different location;
- Alter working hours or shift patterns;
- Introduce new workplace policies and procedures; or
- Make reasonable organisational changes as the business develops.
However, employers should be cautious about relying on flexibility clauses. The existence of a flexibility clause does not automatically mean that any change can be imposed on an employee.
Employment Tribunals and courts generally interpret flexibility clauses narrowly, particularly where the proposed change has a significant impact on the employee. The more substantial the change, the less likely it is that a flexibility clause alone will justify it.
Reasonableness Is Key
Even where a contract contains a flexibility clause, employers must exercise that flexibility reasonably. This means acting in good faith, consulting with employees where appropriate and considering the impact the proposed change may have on the individual.
For example, a clause allowing an employer to change an employee’s place of work may support a move to nearby premises. It is far less likely to justify relocating an employee to a different part of the country without consultation or consideration of their personal circumstances.
Similarly, a clause allowing changes to duties may permit adjustments within the employee’s role, but it is unlikely to justify a completely different position or a significant reduction in status.
Flexibility Clauses Have Limits
A flexibility clause does not give an employer unlimited power to rewrite the employment contract. Attempting to rely on a broadly worded flexibility clause to make significant contractual changes may still expose the employer to claims for breach of contract, unlawful deduction from wages or constructive dismissal.
As a matter of good practice, employers should continue to consult with employees and seek agreement wherever possible, even where they believe a flexibility clause may permit the proposed change. Consultation not only reduces legal risk but also helps maintain positive employee relations.
Can Employers Impose Changes?
In some circumstances employers may be tempted to impose contractual changes where employees refuse to agree to them. However, this approach carries significant legal and employee relations risks and should generally be avoided.
Where an employer unilaterally changes a contractual term without agreement, they may be in breach of contract. The risk is particularly high where the change affects pay, working hours, benefits, place of work or other fundamental terms of employment.
Depending on the circumstances, employees may:
- Raise a formal grievance;
- Refuse to accept the change;
- Bring a breach of contract claim;
- Bring an unlawful deduction from wages claim where pay is affected; or
- Resign and claim constructive dismissal if the change amounts to a fundamental breach of contract.
Even where legal claims do not arise, imposing changes can damage trust and confidence between employer and employee. This can result in reduced morale, increased employee turnover and difficulties retaining key staff.
For these reasons, employers should focus on consultation, communication and obtaining agreement wherever possible. A negotiated solution will almost always present less risk than imposing contractual changes without consent.
Fire and Rehire
Where agreement cannot be reached, some employers consider a process commonly referred to as fire and rehire, more accurately known as dismissal and re-engagement.
Under this approach, employees are dismissed from their existing contracts and offered continued employment under new contractual terms. Whilst dismissal and re-engagement remains lawful in certain circumstances, it is generally regarded as a measure of last resort and should only be considered after meaningful consultation has taken place and all reasonable alternatives have been explored.
The use of fire and rehire has been subject to significant legal and political scrutiny in recent years. As a result, employers considering this approach should proceed with caution and obtain professional advice before taking action.
Consultation Remains Essential
Employers should not view dismissal and re-engagement as a shortcut to contractual change. Before reaching this stage, businesses should be able to demonstrate that they have:
- Clearly explained the business reasons for the proposed changes;
- Consulted with affected employees;
- Listened to employee concerns;
- Considered alternative proposals; and
- Made genuine efforts to reach agreement.
Where larger numbers of employees are affected, collective consultation obligations may also arise.
When Might Fire and Rehire Be Considered?
Dismissal and re-engagement is most commonly considered where contractual changes are necessary to protect the future viability of the business, preserve jobs or respond to significant operational challenges. Even then, employers should carefully assess whether the proposed changes are reasonable and proportionate.
Because of the legal risks involved, dismissal and re-engagement should only be considered after a thorough consultation process and after obtaining specialist employment law or HR advice.
What If An Employee Refuses?
Not all employees will agree to proposed changes to their terms and conditions of employment. This does not necessarily mean that the change cannot proceed, but it does mean that employers should proceed carefully and consider the options available before taking further action.
The first step is usually to continue the consultation process. An employee’s refusal may be based on concerns that can be addressed through further discussion, clarification or adjustments to the original proposal.
Continue The Conversation
Employers should take time to understand why the employee objects to the proposed change. The concerns may relate to practical issues such as childcare arrangements, travel commitments, financial implications or wider personal circumstances.
By listening carefully and engaging constructively, employers may be able to identify a solution that works for both parties.
Consider Compromise Solutions
A compromise may be preferable to an outright disagreement. Depending on the circumstances, employers might consider:
- A phased introduction of the change;
- Transitional arrangements;
- Temporary adjustments;
- Alternative working patterns; or
- Additional support during the transition period.
Demonstrating flexibility and a willingness to explore alternatives can often help secure agreement and preserve positive working relationships.
Protected Conversations
In some situations, employers may wish to have a protected conversation with the employee. Protected conversations allow employers and employees to discuss the possibility of ending employment on agreed terms without those discussions usually being referred to in subsequent unfair dismissal proceedings.
This may be appropriate where it becomes clear that agreement cannot be reached and the employment relationship is unlikely to continue under the proposed arrangements.
Where an agreed exit is being considered, employers may wish to explore the use of a Settlement Agreement to bring the employment relationship to an end in a mutually agreed manner.
Dismissal And Re-engagement
Where agreement remains impossible and the proposed change is considered essential for business reasons, an employer may ultimately consider dismissal and re-engagement. This involves terminating the employee’s existing contract and offering continued employment under revised terms.
As discussed earlier in this guide, dismissal and re-engagement should generally be regarded as a last resort. Employers should be able to demonstrate that meaningful consultation has taken place and that all reasonable alternatives have been considered before pursuing this option.
Every situation will depend on its own facts. The more significant the proposed contractual change, the greater the importance of consultation, documentation and professional advice before any formal action is taken.
Collective Consultation Requirements
Where contractual changes affect larger numbers of employees, employers may need to consider whether collective consultation obligations apply.
This issue most commonly arises where an employer is proposing contractual changes and intends to dismiss and re-engage employees who do not agree to the new terms. In these circumstances, the dismissals may trigger collective consultation requirements even though the reason for dismissal is not redundancy.
As a general rule, collective consultation obligations may arise where an employer is proposing to dismiss and re-engage 20 or more employees at one establishment within a period of 90 days or less.
Where the threshold is met, employers may be required to consult with elected employee representatives or recognised trade union representatives before any dismissals take place. The consultation process follows many of the same principles that apply to collective redundancy consultation.
The purpose of consultation is to:
- Explain the business reasons for the proposed changes;
- Consider ways of avoiding dismissals;
- Explore alternative solutions;
- Reduce the number of employees affected; and
- Mitigate the impact of the proposed changes.
Failure to comply with collective consultation obligations can expose employers to significant financial penalties. For this reason, any organisation considering large-scale contractual changes should obtain professional advice at an early stage.
For most SMEs, collective consultation requirements will not arise because the number of employees affected is relatively small. However, employers planning substantial changes across the workforce should always assess whether these obligations may apply before proceeding.
Documenting Contract Changes
Once agreement has been reached, employers should ensure that any changes to terms and conditions of employment are properly documented. Clear written records help avoid misunderstandings, provide evidence of the agreement reached and ensure that both parties have a consistent understanding of the revised arrangements.
Although some contractual changes may be agreed verbally, relying on verbal agreements alone can create uncertainty and increase the likelihood of disputes at a later date. Written confirmation provides clarity and helps protect both employer and employee.
Written Confirmation
Employers should confirm any agreed changes in writing as soon as possible after agreement has been reached. The document should clearly explain what has changed, when the change will take effect and whether any existing contractual terms remain unchanged.
Providing written confirmation also helps employees understand their new contractual position and gives them an opportunity to raise any concerns if they believe the agreement has been recorded incorrectly.
Variation Letters
For minor changes, employers will often use a variation letter. This is a formal letter confirming the specific contractual term that has changed whilst leaving the remainder of the contract unchanged.
Variation letters are commonly used where changes relate to matters such as working hours, pay, job title or workplace location.
Updated Contracts
Where multiple contractual terms are changing, it may be more practical to issue an updated Contract of Employment. This can help avoid confusion where numerous variation letters have accumulated over time and ensures that the employee has a single document containing all current terms and conditions.
Employers should ensure that any revised contract accurately reflects the agreed changes and is consistent with their wider employment documentation and workplace policies.
Record Keeping
Employers should retain records of the consultation process, correspondence, variation letters and updated contracts. These records can be invaluable if questions later arise about when a change was agreed, what was discussed during consultation or the precise terms that were implemented.
Good record keeping is particularly important where contractual changes are introduced across a number of employees, as it helps demonstrate consistency and fairness throughout the process.
For further information about employment contracts and the documentation employers are required to provide, see our guide to Contracts of Employment.
Common Mistakes SMEs Make
Changing terms and conditions of employment can be a sensitive process. Whilst most employers recognise the need to adapt as their business evolves, many disputes arise because the change process itself has not been handled correctly.
Some of the most common mistakes SMEs make include:
- Assuming flexibility clauses allow any change: flexibility clauses can be useful, but they do not give employers unlimited authority to alter contractual terms. Significant changes will often still require consultation and employee agreement.
- Failing to consult: employers sometimes announce contractual changes as a decision rather than consulting employees before reaching a conclusion. Meaningful consultation is often one of the most important factors in securing agreement and reducing legal risk.
- Making changes verbally: verbal discussions can be useful, but contractual changes should always be confirmed in writing. Failing to document changes can lead to disagreements about what was agreed and when.
- Imposing changes immediately: implementing changes without consultation or agreement can damage employee relations and may expose the employer to breach of contract, unlawful deduction from wages or constructive dismissal claims.
- Failing to explain the business reasons: employees are far more likely to support change when they understand why it is necessary. A lack of transparency often creates resistance and distrust.
- Relying on outdated contracts: older contracts may contain provisions that no longer reflect current legislation or the way the business operates. Before proposing changes, employers should ensure they fully understand the existing contractual position.
- Treating every employee the same: whilst consistency is important, employers should also consider individual circumstances. A proposed change may affect one employee very differently from another.
- Leaving documentation until later: employers sometimes focus on obtaining agreement and overlook the importance of updating contracts and maintaining accurate records. This can create problems months or years later when questions arise about the employee’s contractual terms.
The most successful contractual changes are usually those that are planned carefully, communicated openly and supported by a genuine consultation process. Employers who take time to explain the reasons for change and listen to employee concerns are often able to achieve their objectives whilst maintaining positive working relationships.
Consistency Matters
Employees are generally more willing to accept contractual changes where employers communicate openly, explain the reasons for change and apply decisions consistently across the workforce.
Consistency does not mean treating every situation identically. Individual circumstances may need to be taken into account, particularly where a proposed change has a disproportionate impact on a particular employee. However, employers should ensure that the overall process is fair, transparent and applied consistently to all affected employees.
A clear consultation process, accurate documentation and a willingness to listen to employee concerns can help build trust and reduce resistance to change. Employees are far more likely to engage positively where they feel they have been consulted properly and their views have been genuinely considered.
By approaching contractual changes in a structured and consistent manner, employers can minimise legal risks, maintain positive employee relations and improve the likelihood of achieving a successful outcome for both the business and its employees.
How Kea HR Can Help
Changing terms and conditions of employment can be one of the most challenging aspects of people management. Whilst some changes are straightforward, others can involve complex contractual, employee relations and legal considerations.
Kea HR provides practical, commercially focused advice to help employers implement contractual changes fairly, consistently and in line with employment law requirements.
Our support includes:
- Contract reviews – identifying existing contractual provisions, flexibility clauses and potential risks before changes are proposed.
- Consultation support – helping employers plan and manage consultation processes, prepare documentation and communicate proposed changes effectively.
- Restructuring advice – supporting organisational change projects involving revised roles, reporting structures, working patterns or business reorganisation.
- Change management guidance – helping employers implement contractual changes whilst maintaining employee engagement and minimising disruption.
- Settlement Agreements – advising on the appropriate use of Settlement Agreements where an agreed exit may be a preferable alternative to ongoing dispute or formal action.
Whether you are introducing a minor contractual change affecting a single employee or managing a wider organisational change programme, obtaining advice at an early stage can help reduce risk, improve employee relations and increase the likelihood of a successful outcome.
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