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Varying a contract of employment: Avoid the pitfalls

Most organisations find that the changing needs of their business will eventually require them to change the terms and conditions of employees' contracts. However, varying a contract of employment needs to be done with care if you want to avoid costly tribunal claims later on.

Making changes to employees' pay, hours or working conditions is often inevitable due to economic circumstances. However, varying contracts of employment can be a cause of major concern for many employers.   A considerable number of employment tribunal applications arise every year from claims of constructive dismissal or breach of contract because employers failed to follow the correct procedures for varying the terms of employment of their staff.

Drawing up a clear business case to support any proposed changes is a crucial first step towards varying contract terms. Before you start trying to make changes to contracts, it's important to do a thorough check of existing documents and consult with your staff on any proposed changes. Understanding exactly how, what and when to communicate with your staff or their representatives is essential for achieving agreement on any variation of contract terms. All changes that you agree on then need to be put in writing to those concerned within one month.

The cost of getting it wrong can be considerable. If you fail to reach an agreement and go ahead and impose changes to terms and conditions without staff consent, then you could be held to be in breach of contract. While tribunal claims must be made within three months of the employment ending, court claims for breach of contract can still be made up to six years after the event. It's worth bearing mind, too, that while tribunal damages are capped at £25,000, there is no such limit in the courts.

Acas provides training in varying a contract of employment, how to manage redundancy and restructuring and drawing up staff contracts.

Visit the Acas training and business solutions area for more information.

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