Top considerations for contractual provision changes

 

We have discussed reasons why a business would make changes to an employee’s terms and conditions. In this article we will look at some factors to take into account when choosing to change terms and conditions if you have contractual provision to so do in the form of a variation clause in the contract of employment.

What is a variation clause?

A variation clause would be contained in the employment contract and is a provision expressly giving the employer the power to amend the terms of the employment contract.

What types of changes could be made using a variation clause?

There are various types of changes that could be made by including a variation clause in an employment contract.  Some would be more relevant in certain industries compared to others.  The most common variation clauses would include:

  • Option to change an employee’s location (mobility clause) – a business can include a clause to change the employee’s work location. Companies need to state a work location in the contract but often choose the option to confirm that this could also be changed to a location within 20 miles of this, for instance.
  • Shift pattern – in a business where a shift pattern is in operation, it is prudent for business to include a variation clause that dictates that the employees shift pattern can be changed, with notice, to accommodate business changes.
  • Weekly Hours – although employees standard working week is confirmed in an employment contract, businesses should include the need for an employee to be flexible and also the possible need for overtime occasionally.
  • Duties – employee contracts can also state that an employees agreed job title/job description can be amended and that the duties listed are not an exhaustive list of the job requirements. This can be helpful if an employee refuses to complete duties that are outside of their ‘normal’ remit.
  • Bonuses – it is advantageous to add a clause under the bonus section in an employment contract, which states that bonuses are discretionary and are subject to change due to business performance.

Many employers also include a ‘blanket’ variation clause providing for the employer to make changes to the contract without specifying what types of changes those might be.

What are the limitations of variation clauses?

The main limitation of variation clauses is that they are frequently not enforceable. Variation clauses have to be reasonable and exercised reasonably. The blanket variation clauses covering all changes that could be made to an employee’s contract are therefore unlikely to be enforceable.  Variation clauses are most likely to be enforceable if they are specific to the term you are requesting flexibility on in future, for example a work location variation clause, and are also reasonable to the role and in the circumstances. A location variation clause permitting the employer to relocate staff anywhere within the UK may be enforceable for some types of role, where this is common practice, well-established, used regularly and known to the employee, for example. But trying to relocate someone to a completely different area who works in a role where this would not be normal is unlikely to be enforceable, and relocation in those circumstances is only likely to be reasonable within a very limited distance.

How are these clauses implemented?

If you have a variation clause already in place in your employment contracts and want to exercise the right for the flexibility you should follow the below steps:

  1. Check that the change is reasonable – although having a variation clause is a great first step to be able to make changes to terms in a contract, it is important that they are still reasonable. Check that the change specifically confirms the change you are requesting.  If you are trying to change an employee’s work location to an office 100 miles away but your contract says that it can be changed within a 20-mile radius, this would not be reasonable.
  2. Meet with affected employees – it is still important to communicate and help employees understand the reason for a change in their contract. Even though they have already agreed to the possibility of the change by signing their contract, having their full understanding and agreement will ensure that the process moves more smoothly and there is less resistance to the change.
  3. Give sufficient notice to allow employees to make arrangements to accommodate the change, if necessary.
  4. Confirm in writing the variation of the contract to each individual employee affected, and record this on their file
  5. Store the letter on the employees file for future reference.

There will also be employees that will not initially agree to the change and are resistant. Exploring the nature of their concerns and addressing them where possible will help achieve agreement. For example, if they resist moving to a new office and you explore the concerns, it may be that by making arrangements for parking, or allowing a later start to accommodate nursery drop-offs might ease it through.

Another tip would be to communicate the change around pay reviews or bonus time, possibly increasing pay by more or offering a one-off payment to reflect the inconvenience.  The offer of a reward will encourage employees to see the benefit of the change.

 

If you would like more information and/or advice about variation clauses and if your current variation clauses are valid, please get in touch.