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Four Reasons To Review An Employment Contract

23rd Apr 2014
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Much of the work that I do as an HR consultant is reviewing employment contracts and employee handbooks.  This can be due to taking on a new client with existing documents as well as providing this service to existing clients. Here I provide five reasons to review an employment contract.

Employment law seems to change every five minutes.  The government have now decreed that employment law changes should be made April and October each year, but often changes are often implemented outside of these months.    Employment law therefore can move on very quickly and employment terms and conditions can get very out of date if they are not reviewed on a regular basis.  For example pension auto enrolment will be hitting the SME market and it is important to add in an appropriate clause to the contract to comply with statutory law.  This is important if there is no clause relating to pensions in the document or an existing pension scheme is detailed.

Sometimes an employment contract may not contain all the appropriate clauses.  For example I recently reviewed a document that did not contain a continuous service clauses.  This is essential as detailed by the Employment Rights Act 1996.  In a TUPE situation where an employee transfers from one employer to another and possibly again and again, often the only way to track an original start date is by the continuous service date on the contract.  The Employment Rights Act 1996 (part 1) details all the essential clauses that need to be included http://www.legislation.gov.uk/ukpga/1996/18/part/I

Another reason for an employer to review an employment contract is when they wish to make changes and negotiate new terms.  A review of the existing terms first may highlight the changes that need to be negotiated.  However, the employer can not change terms and conditions of employment on a whim, there needs to be clear justification, not least, to convincingly explain the situation to employees. It is important that all the terms are clear.  Often I come across contracts that contain discretionary clauses.  When discretion is used to make judgements human subjectivity can come into play possibly leading to discrimination when one employee is treated less favourably than another.  Rather than have discretion, clauses should be clear to avoid any discriminatory variances.

Following a merger or acquisition where two companies (or more) may come together, a company may be faced with various terms and conditions.  An employer may wish to harmonise terms and conditions following a TUPE situation for various reasons - difficult business conditions, simplicity, cohesion, redress imbalances, restrictive convenants or difficulty with providing benefits.

Previously with TUPE legislation it was impossible to change terms and conditions post-merger except for an ETO (economic, technological or organisational) reason as previous terms were protected.  However since 31 January 2014 the law has changed. Businesses with collective agreements may negotiate a change one year post-transfer provided the changes are not less favourable.  Contractual changes will be permitted for economic, technical or organisational reasons with the agreement of the employee and or where a contractual right of variation exists.  However, the latter does not permit an employer to unilaterally impose a change and consultation should always be undertaken and written agreement gained.

If a contract is reviewed and changes are to be made consultation with and written agreement from employees is essential.  Employees can be provided with a brand new set of employment terms and conditions to sign or may be issued with contract variation letter with copy for signature depending on the extent of the changes.

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