Changes to terms of employment (including reduced hours)

By agreement, employers can implement a variety of innovative new arrangements including reduced hours and reduced pay, reduced hours for the same pay, or the same hours with reduced pay. The general contractual principle is that change can only be effective when agreed by both parties, and that applies to employment contracts too. It is always best to try and consult and agree changes first. Any agreed changes should be confirmed in writing by the employer and the employee should sign their agreement.  This will then be stored as an addendum to the employment contract.

Potential alternative arrangements include:

  • reduced working weeks
  • minimum-hours or zero-hours contracts
  • temporary or permanent reductions in working days for all employees
  • alternate week working patterns
  • reduced bonuses
  • recruitment freezes or salary reductions.

Some terms and conditions have flexibility clauses which purport to allow the employer to unilaterally make contractual variations where necessary. These clauses may be helpful in persuading employees that changes are permissible but, in reality, employers cannot use flexibility clauses to enforce changes to the employees’ disadvantage. The clauses may be effective for minor changes only.

Consultation ensures employers and employees discuss planned changes, and work together to implement them. A reduction in pay or hours resulting in less pay is a significant change with a higher duty to consult. If there is inadequate consultation the implied term of trust and confidence between employer and employee may be broken.

If employees do not agree, then employers need to consult individually and attempt to explain the reasons and necessity for the proposed change. If the employee still refuses, employers need to decide whether to impose the change anyway and see if the employees agree or use dismissal and re-engagement on the new terms. Dismissal and re-engagement can be risky and will trigger collective consultation requirements where 20 or more dismissals are proposed.

Other than in cases where the employee freely agrees to the proposed change, employers would be advised to seek specialist advice from either ABDO HR Services or ABDO Legal Helpline.