Employers may wish to vary the terms of an Employment Contract to react to changing circumstances or to  reorganise a business to make it more efficient or profitable.  During hard times, employers may seek to change terms relating to pay , benefits or working hours.

If the proposed changes favour the employee, there is unlikely to be any difficulty but if changes are unfavourable there is the potential for problems.  Any change imposed by the employer will normally be a breach of contract and may entitle the employee to compensation unless the employer has a contractual right to vary the terms of the contract or the employee’s consent to this. 

In a recent case, Asda wanted to harmonise all of their staff’s contracts to the same pay and work structure as historically some were on better terms than others.  Asda claimed that the changes were lawful and relied on a very general clause in their staff handbook which read: “Asda reserve the right to review, revise, amend or replace the contents of this handbook and introduce new policies from time to time reflecting the changing needs of the business”.   Crucially, the handbook was incorporated into the staff contracts of employment.

The Tribunal decided that the wording in the handbook was wide enough to allow Asda to make changes to the pay and work structure.  Provided that these were properly implemented, consent of the employees was not required.

For advice on any issues raised, please contact Simon Thomas, partner specialising in Employment Law.