Letter seeking agreement to vary employment contract terms

The best way to achieve a change to one or more terms of an employee’s contract of employment is by mutual agreement. Let the employee know in writing that you are proposing to make a change and seek their written consent to it.

Binding contract

The contract of employment is binding on both parties. This means that it’s generally unlawful for you to unilaterally change an existing employee’s contract without their agreement - unless the change is permitted by the contract itself. If you impose contractual changes without their express agreement, you will be in breach of contract. If the breach is sufficiently serious, they may claim constructive unfair dismissal if they’re forced to resign due to your actions and they have sufficient continuity of employment. An employee can generally claim constructive dismissal if they have been employed for two years or more.

Express agreement

If you wish to change an employee’s contract of employment, you should first inform them both verbally and in writing that you’re proposing (not making) a change. You should set out in detail the nature of the proposed change and what your business reasons are for it. Our Letter Seeking Agreement to Vary Employment Contract Terms will help you here. The employee should be invited to consider the change and then revert to you with their views.

In addition, where you envisage that, if the employee doesn’t agree to the change, you might opt to dismiss them and offer them re-engagement on new terms to effect the change (sometimes called “fire and rehire”), you should ensure you comply with the Code of Practice on Dismissal and Re-engagement, even if the change only affects one employee and regardless of your reasons for seeking it. In particular, the Code says that you should start by informing and consulting with the employee, and you should provide information to them as early as reasonably possible and share as much information with them about your proposals as reasonably possible. You should consider what information could be provided about what the proposed change is, who will be affected by it, the business reasons for it, the anticipated timings for its introduction, any other options that you’ve considered and your proposed next steps. We’ve covered these matters in our letter.

Not willing to agree

If an employee is not willing to accept a proposed change, you will have to engage in a period of further meaningful consultation and negotiation to try and obtain their consent to the change. You could offer an incentive to help here. This could take the form of a pay increase, a one-off bonus or extra holiday entitlement. Alternatively, you might have to amend your proposal to one that is acceptable to the employee. The Code provides that you should consult openly and in good faith with the employee for as long as reasonably possible with a view to reaching an agreed outcome. You should also genuinely consider any reasonable alternative proposals.