As an employer, you may need to make changes to your employee’s working conditions. Often, this will involve making a change to their employment contract. Changes may be made for a variety of reasons, including:
- restructures or transfer of business;
- specific business circumstances;
- renegotiated conditions or benefits;
- extending a fixed-term or maximum-term employment arrangement; and
- if the Fair Work Commission (FWC) changes certain rules.
Changes to the terms and conditions of employment agreements can dramatically affect your employee’s working conditions, even if the changes comply with Australian law. For this reason, it is essential that any changes are lawful and carried out correctly. This article will outline how you can change your employee’s employment contract and highlight key obligations to note. It will also provide helpful tips for approaching your employees with proposed changes.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
The Basic Rule
The basic rule is that you cannot change your employee’s employment contract unilaterally, that is, without first notifying them and seeking their agreement to do so. This is especially true if you want to change fundamental terms in their contract.
Exceptions to the basic rule apply where you and your employee agree to the change being made ahead of time. This may be the case following, for example, a salary negotiation. Further exceptions apply if the contract has express provisions allowing for certain variations or where legislation or an applicable modern award or enterprise agreement allows it. An employment lawyer can help you understand these exceptions and navigate this process.
What are Fundamental Terms?
Fundamental terms include your employees’ wages, work hours, and employment type. Generally speaking, changing a fundamental term will have the effect of varying the parties’ agreed terms. In some cases, however, changing fundamental terms can affect the operation of the entire contract, resulting in the termination of the existing contract and the formation of a brand new contract. It is not always clear when this will occur. You should seek legal advice if you intend to change a fundamental contract term.
Continue reading this article below the formWhat are Non-fundamental Terms?
Non-fundamental terms in an employment agreement include those relating to performance assessment methods, the use of information technology and ongoing training requirements.
Usually, non-fundamental terms are incorporated into a company policy, which you can change as required from time to time. To ensure your employees remain compliant with company policies if and when you make a change, you should ensure that the employment contract includes a provision addressing policies.
For example, it could stipulate that a condition of your employee’s employment is that they comply with the company policies at all times. If your employee fails to follow your company policies, you may be able to take disciplinary action.
Further, you may be able to make very minor or temporary changes to your employee’s employment conditions by giving them a lawful and reasonable direction. For example, you might direct them to work from a location other than that stipulated in the contract for a period of time. In this situation, the contractual terms will likely remain unchanged.
How to Approach Employees When Changing Their Contract
Below are some general steps you should take when informing your employee of a change to their employment contract.
First, you should have a meeting or send them an email explaining all the changes. When you do this:
- your employee must understand their obligations and what has changed in their contract; and
- you can explain your reasoning behind why it has changed and the impacts it will have on your employees.
Secondly, you should take time to understand their concerns. You should:
- consider whether you can help them with their concerns or work around these; and
- record everything that occurs either in email correspondence or verbal discussions.
Lastly, you should ensure that all employees sign off on these changes. This is necessary to prove that the change is being made with your employee’s knowledge and consent.
Key Takeaways
As an employer, you cannot change an employment contract without your employees’ knowledge and consent. Before making any changes, you should schedule a meeting with the relevant employee and explain the changes. You should also explain your reasoning behind these changes. Likewise, take the time to listen to any concerns. Once you and your employee come to an agreement, it is best practice to have them sign a variation letter or a new contract to formalise their consent.
If you need help changing your employment contract or understanding your legal requirements when changing the contract, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Employees must be aware of and consent to any changes to their employment contract. An exception to this is where there are express terms in their employment contract allowing the change, or where legislation or an applicable modern award or enterprise agreement allows it.
It is important to spend time ensuring your employee understands their new obligations. But, most importantly, make sure your employees sign a variation letter or a new contract to formalise their consent.
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