How to change employee agreements – without disagreement

By: Karl Limpert

Date: 18 November 2009

Employers need to change their employees’ contracts for a variety of reasons – often in today’s hard times, to help a business survive.

Once you know you need to change an employment contract, you need to know how to do it properly - unfortunately, contract changes done badly could be the downfall of a business.

Visits to online business forums will find numerous employers looking for help on how to change a contract. Invariably, forum members offer an array of advice, including enthusiastic suggestions the employer just goes ahead: “You can do this because you’re the boss.” But there’s a bit more to it – such as the law.

To understand what changes you can and can’t make, start by considering what a contract means. A contract is an agreement between two parties that governs an activity – in this case, a job: and includes specifics about, among other things, what work will be done, conditions and pay. For anything to change, employer and employee both need to agree. So it’s entirely wrong to think that anyone, boss or otherwise, can simply change a contract off their own bat.

Some contracts contain a clause that provides one party with the right to make changes without the other party’s consent. But even this has to be used in the correct, and rather limited, way – bosses can’t just increase working hours or reduce pay. These clauses can only be used to clarify existing terms, and make the odd tweak, not effectively to rewrite the agreement.

If you need to modify a contract, the most sensible option is to ensure there are clear clauses in your standard employee contract that allow for changes. These could include the right to introduce a shorter working week or temporary lay-offs.

Plan in advance – by getting comprehensive contracts in place, either at the time of appointment, or via agreed changes to the contract. Employees can’t be expected to freely agree to these changes during the contract, which is why it is wiser to get it right before staff start work. However, all is not lost if you haven’t acted in advance and need to make changes now.

Consider what is typically an annual change to the contract anyway – a pay rise. As one term of the contract – the pay – will be changing, there is no reason not to make other changes at the same time. You still need agreement (as does a pay rise, but employees don’t often protest about these). But if you’re offering a pay rise you may find staff are open to other contract changes to the contract as a condition for the increase (however modest).

Done properly, it can be very easy - even for employees on minimum wage. An offer to improve pay a couple of months early won’t cost the business much more, but the improvements to the contract could more than return the extra outlay.

Law Donut

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