How Are You Coping with the National Living Wage?

The recruitment group Manpower has reported that employers are planning to cut overtime and reduce rates paid for weekend working, in order to claw back the extra cost of the new National Living Wage. Employers who are keen to cut costs and make savings will be exploring all avenues to do so but is this legal? Read on to find out more.

The first thing you need to consider is whether the term that you are planning to alter is a contractual term. Often this is easy to determine, as contractual terms are spelled out in the employment contract and other binding contractual documentation. An unconditional oral agreement will also constitute a contractually binding term. Sometimes, a term is less straightforward to identify because it is implied (e.g. through custom and practice), or incorporated (e.g. by statute or a collective agreement). Some terms may be set out in the handbook but lack contractual status – they are simply guidance. Care should be taken with such clauses as, even if they are stated to be discretionary, they may become contractually binding through custom and practice.

You may have authority under the terms of the contract to effect a change: you should check to see whether the provision affords you sufficient flexibility. Remember that any ambiguity will be construed against the employer.

Once you have identified the nature of the provision, you can then decide how to change it. If the clause or provision is contractual, you cannot unilaterally change the clause without being in breach of the contract and opening yourself up to claims for unfair dismissal, breach of contract, or deductions from wages. If the provision is non-contractual, you should consider whether making a fundamental change will breach the implied term of trust and confidence.

5 Tips for Changing a Term of Employment

  1. Check whether the contract authorises the change. If the provision allows for sufficient flexibility, the proposed change can be imposed without consent. Always remember the implied duty of trust and confidence, so introduce a change fairly and with warning.
  2. Seek the employee’s consent. If the clause is contractual, a unilateral change will constitute a breach of contract.
  3. Consult. You should always be seen to be acting fairly. Imposing a change without consultation will increase your risks of claims and lower staff morale. Where more than 20 employees are affected, you may be obliged to collectively consult with employee representatives.
  4. Hold meetings. If an employee does not voluntarily consent, explain why the change needs to be made.
  5. Terminate and re-engage. If the employee refuses to accept the change, your last resort may be to terminate the contract and immediately re-engage on the altered terms.

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