If employment contract changes cannot be agreed
Although it can sometimes feel difficult and time-consuming to reach an agreement on a contract change, it's important to remember there will always be:
- benefits for everyone involved if you do reach agreement
- significant risks for you if you try to change a contract without agreement
Risks of trying to change a contract without agreement can include:
- legal claims, for example claims of breach of contract or constructive dismissal
- damaging morale and good working relations in an organisation, potentially for a long time
- strikes or other industrial action, if there's a trade union
- reputational damage to an organisation or brand
How you can keep trying to reach agreement
If you have consulted with employees and employee representatives and have not yet been able to reach agreement, you should continue to explore all options for as long as is reasonably possible.
It can help to consider:
- how to keep discussions constructive
- if anything might make the proposed changes easier for people to agree
- how Acas can work with you and employee representatives to help reach an agreement
Keeping discussions constructive
To stay focused on keeping discussions constructive, it can help to:
- share any more relevant information – being transparent about your reasons can help others understand them better and make discussions more effective
- continue to ask questions and listen to answers – taking time to understand other people's views can help you find common ground
- be prepared to consider changes to your original proposal – encourage alternative solutions and be open-minded to them
- try to agree one change at a time – it can help to break down complex problems into smaller ones, for example start with 'what' might need to change, then move on to 'how' and 'when'
- recognise that differences of opinion are normal and to be expected – considering different views can lead to new possibilities to explore
- try to find a solution that includes something for everyone – do not assume that someone must win and someone must lose
Making proposed changes easier for people to agree
If employees or representatives are reluctant to agree to a proposed change, you should consider if there's anything you could offer that could make the proposal more attractive.
In some cases, it might be possible to offer some new, more beneficial terms to compensate for a less attractive change to other terms. This is sometimes called 'buying out' a term in the contract.
For example, an employer might offer extra paid or unpaid leave to compensate for an unpopular proposal to change agreed shift patterns.
It can also be helpful to consider if:
- a change could be introduced gradually rather than all at once
- a change could be introduced on a temporary basis only
- you could achieve the aims of a proposed change in a way that might seem fairer and more acceptable, for example by changing senior managers’ contracts in a similar way to those of other employees
- all parts of a proposed change are needed, or if you could achieve some aims in other ways
- there are solutions that may not need a contract change
However, if there's a collective agreement with a trade union, it should set out a procedure for negotiations ('collective bargaining') with the union.
You must not make direct offers to employees or workers as an incentive to give up any of their terms that are covered by the agreement, unless you've followed and genuinely believe you've exhausted the agreed collective bargaining procedure.
If you make direct offers without first exhausting the agreed procedure, you're likely to be legally challenged about this at an employment tribunal.
How Acas can help
We offer a range of services that can help you reach agreement with employees and employee representatives. This includes:
- Acas services to help resolve disagreements
- training and tailored support for your organisation
If you decide to go ahead and make a contract change
If you still cannot reach agreement after extensive attempts, it may sometimes be possible to introduce a contractual change by either:
- giving notice to the employee that you intend to make a change ('imposing' a change) to their employment contract with effect from a certain date
- giving notice to terminate the employee's existing contract and offering to rehire the employee on the new terms ('dismissing and rehiring' – some people call this 'fire and rehire')
You should thoroughly explore all other options before deciding to take either of these steps. They both carry significant legal risks and can damage working relations, morale and levels of performance in your organisation.
Imposing a change
If you impose a change to a contract before getting agreement you will be breaking the agreed contract ('in breach of contract').
In some circumstances, an employee's actions might count as agreeing to ('affirming') the change if:
- they continue to work under the changed terms and conditions
- they do not inform you that they do not agree to the change
However, if an employee does not agree with an imposed change, they might decide to:
- temporarily work to the new terms and conditions, but make it clear they are challenging the change ('working under protest')
- resign and make a claim of constructive dismissal at an employment tribunal, if they feel the change significantly breaks their agreed contract (a 'fundamental breach of contract')
If an employee works under protest
If an employee works under protest, they continue to work under the changed terms, but make it clear that they do not agree to the change and take steps to challenge it.
An employee should make it clear to you that they're working under protest. They should usually do this in writing on a regular basis, for example every time they get paid.
They should normally only work under protest for a short time so they can formally raise their concerns with you or take legal action if you do not resolve their concerns.
For example, an employee could decide to make legal claims against the organisation for:
- damages for breach of contract at a civil court
- unlawful deduction from wages at an employment tribunal, if the change affects their pay
- unlawful discrimination, if the change means they are treated unfairly in relation to certain 'protected characteristics' under the law
If there's a trade union
If you impose a change after not being able to reach agreement with a recognised trade union, the trade union might consider:
- taking industrial action – for example a strike, refusing to take part in certain activities, or a 'work to rule' where employees do no more than what they're contractually required to do
- supporting individual employees to make claims to a court or employment tribunal
Dismissing and rehiring
You should only consider dismissing and offering to rehire someone on new terms ('dismissal and re-engagement') as a last resort. This is sometimes known as 'fire and rehire'.
Before dismissing, you must have made all reasonable attempts to reach agreement through a full and thorough consultation.
If you're proposing to dismiss and rehire 20 or more employees, by law you must collectively consult on the proposed dismissals.
It's important to consider that by ending the employee's original contract of employment you will be dismissing them, even if they accept a new contract and continue to work for you. So you must:
- have a fair reason for dismissal
- follow a fair dismissal process
- provide the correct amount of notice
- offer the employee the right of appeal against their dismissal
Risks of dismissing and rehiring
Proposing to dismiss and rehire an employee or worker is an extreme step that has significant risks.
You should always carefully consider the risks, even if you feel there's an urgent need to make contract changes and expect it may be difficult to reach agreement.
It's likely that employees or their representatives will view a proposal to dismiss and rehire as a threat. This might:
- cause immediate and long-lasting damage to trust and working relations in an organisation
- make it harder for both sides to reach a negotiated solution
Other risks include:
- losing valued people from an organisation – either because they do not accept the offer of a new contract, or they leave afterwards because they're not happy with the change or the way it was made
- legal claims, such as potentially costly claims of constructive dismissal and unfair dismissal
- reputational damage to an organisation or brand, making it difficult to attract new employees
- likely industrial action if there's a trade union, as well as longer-term damage to relations with the union – find advice on industrial action on GOV.UK
- the issue you're looking to deal with still not being resolved satisfactorily
Consider the reason for dismissal
It's important to consider the reason for the proposed dismissal. This will affect the process you need to follow and any payments you may need to make to employees.
If the reason for dismissal is redundancy
The reason for dismissal could be redundancy even if you are offering the employee a new contract. For example, it could be a redundancy situation if:
- you're proposing contract changes because the number or types of roles needed to do certain work have changed
- the changes you're proposing will significantly change the roles of affected employees
If it is a redundancy situation you must:
Other reasons for dismissal
If you dismiss and offer to rehire someone and it is not a redundancy situation, you will need to show you had 'some other substantial reason' to dismiss if it's challenged at an employment tribunal.
For example, it might be considered 'some other substantial reason' if:
- your business is in severe financial distress
- you've made exhaustive attempts to reach agreement on contract changes
- there was genuinely no other option but to dismiss and offer to rehire
An employment tribunal will consider factors such as:
- if you had a good business reason for introducing the change
- if you reasonably and genuinely consulted with employees, including making any compromises where appropriate
- if the changes you made were reasonable, for example if changes did not unfairly affect the financial wellbeing of employees
- the extent to which you considered alternatives to dismissal
- if any recognised trade union recommended or objected to the proposed terms
- how many employees accepted the change and how many rejected it
- if it was reasonable for an employee to refuse the change in the circumstances
If you're proposing to dismiss and rehire 20 or more employees
By law, you must collectively consult with a recognised trade union or employee representatives if you're proposing to dismiss and rehire 20 or more employees:
- at one establishment
- within a period of 90 days or less
An 'establishment' might be wider than a single workplace, but not necessarily as wide as your whole organisation.
You must collectively consult to explore how to:
- avoid the dismissals
- reduce the number of dismissals
- limit the consequences of the dismissals within the organisation
The law says you must start this consultation 'in good time'. What counts as 'in good time' will depend on the circumstances. However, you must start consultation for:
- 20 to 99 employees – at least 30 days before the first proposed dismissal
- 100 or more employees – at least 45 days before the first proposed dismissal
You must follow the same process as for collective consultation in redundancy situations. This applies even if the reason you’re proposing to dismiss and rehire is not redundancy but 'some other substantial reason'.
If you fail to collectively consult
If you fail to collectively consult, it could lead to a claim for compensation (a 'protective award'). This can be up to 90 days' full pay for each affected employee.