Sara Marshall
Associate Partner Sara Marshall explains when an employer should be referring to employees before making changes to their terms of employment.
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AS AN EMPLOYER, you may occasionally need to make changes to your employees’ contracts to accommodate business needs, changes in the law or evolving working practices.
But how do you know when consultation is necessary? Understanding the legal framework around contract changes is crucial, as failure to follow the proper procedures can lead to disputes, legal claims, or even claims for unfair dismissal.
In this article, I will provide some real-world scenarios to illustrate when you need to consult employees before making changes to their contracts.
A contract of employment is an agreement between the employer and employee that outlines the terms and conditions of their employment. These terms can cover areas such as salary, job role, hours of work, and benefits.
When you wish to change one of these terms – particularly a fundamental or core element like salary or working hours – it is essential to consider the need for consultation.
When consultation is not required
Not all changes to employment contracts require formal consultation. Here are a few scenarios where consultation may not be necessary:
Minor Changes
If the change is not significant and it does not affect the fundamental terms of the contract, consultation is generally not required.
For instance, an employer might alter a relatively minor aspect of the working relationship, such as an internal policy or an office layout, without needing to consult employees directly.
Example: Changing the Payment Date
A client with whom I worked recently wanted to change their employees’ pay date from the 15th of the month to the 28th of the month. This change, while potentially inconvenient, did not fundamentally alter the terms of employment. Employees were still being paid the same amount and no other significant terms of their employment were being altered.
Therefore, no formal consultation was required. The employer simply notified employees of the change well in advance, and the change was made without any legal challenges.
As a rule of thumb, as long as the fundamental nature of the employment contract remains unchanged and the change does not affect employees’ rights or pay in a way that creates a real disadvantage, no consultation is necessary.
When consultation is required
There are several situations where consultation is legally required, particularly if the proposed change will:
Significantly alter the terms of employment Changes that directly affect the core terms of employment – such as salary, hours of work, or job duties – will usually require consultation. In these instances, you must engage with employees to discuss the changes and allow them to express their views.
Potentially cause a substantial change to working conditions A substantial change to working conditions could involve the relocation of the workplace, a change in working hours or changes to remuneration or benefits.
These changes are likely to affect the employee’s working life and need to be discussed before implementation.
Let’s say you want to change employees’ working hours or move them to a different location – for instance, asking employees to start working at a new office location that is significantly further from their current place of work.
In this case, consultation is required to discuss the change, address any concerns employees may have, and explore potential solutions, such as providing relocation assistance.
Changes to pay and benefits
Any changes to an employee’s pay – whether it be reducing salary, changing commission structures, or altering bonuses – would typically require consultation. A decision to reduce an employee’s pay without agreement could lead to a claim for constructive dismissal.
Redundancy or restructuring
In cases where you are considering redundancies or major restructuring, you must consult employees or their representatives about the changes.
The consultation must be meaningful and occur within a statutory timeframe, generally at least 30 days before any redundancies are made if 20 or more employees are affected.
If the changes to the workforce structure lead to a significant impact on employees’ terms, consultation is required.
The law requires that consultation be fair and meaningful. It is important to keep the following in mind when engaging in a consultation process:
- Provide clear information Let employees know the reasons for the change and how it will affect them.
- Allow for dialogue Offer employees the chance to express their views, ask questions, and raise concerns.
- Consider alternatives Be open to negotiating alternative solutions that may mitigate the impact on employees.
- Timeframe Give enough time for employees to consider the proposed changes and provide feedback.
Knowing when consultation is required for changes to contracts is an essential aspect of managing employment law obligations. While not all contract changes require formal consultation, any change that could significantly affect employees’ pay, working conditions or job security should trigger a dialogue.
This ensures that changes are made in a way that is legally compliant and, more importantly, fair to your workforce.
If you are unsure whether a specific change to your employees’ contracts requires consultation, it is always best to seek legal advice.
This will not only protect your business from potential legal challenges but will also foster a more positive and transparent relationship with your employees.
Sara Marshall is an Associate Partner and Head of Employment Law at Franklins Solicitors. To get in touch with the team, call 01908 660966 or email .
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