Employment contract variation is the process of changing an existing employment contract, usually by agreement between the employer and employee.
Employers may need to vary contracts for many reasons. The business may be changing working hours, pay arrangements, duties, job location, hybrid working arrangements, reporting lines or benefits. The reason may be sensible, but the way the change is recorded matters.
If an employment contract variation is not confirmed clearly, disputes can arise later about what was agreed, when the change started and whether the change was temporary or permanent.
What is it?
Employment contract variation means changing one or more terms of an existing contract. This may involve a written contract, a written statement of employment particulars, an offer letter, a handbook term, or a term that has developed through custom and practice.
Common examples include changes to:
- pay or salary
- working hours
- job title or duties
- place of work
- hybrid or remote working arrangements
- notice periods
- bonus or commission terms
- benefits
- shift patterns
Employers should not assume that a change is minor simply because it seems practical from a business point of view. A change may have a significant effect on the employee.
Employment variation usually needs agreement
In most cases, an employment contract variation should be agreed by both the employer and employee. Government guidance explains that employers and employees must normally stick to the contract until it ends or until terms are changed, usually by agreement.
Acas also states that contract changes must be agreed by both the worker and employer. This is why employers should be cautious about imposing changes without proper consultation and agreement.
Where employees object, the employer should pause and consider the risks before moving ahead.
Check the existing contract before variation
Before proposing an employment contract variation, employers should review the existing contract. The contract may already include terms about flexibility, mobility, duties, working hours or business reorganisation.
However, flexibility clauses should not be treated as unlimited power to change terms. Acas guidance says flexibility clauses are intended to allow changes in certain circumstances, but employers should still act reasonably.
If the contract wording is old, unclear or inconsistent with what happens in practice, the employer should take extra care before relying on it.
Employers reviewing the starting position may need advice on contracts of employment.
Consult before the variation
Where a proposed variation affects employees in a meaningful way, consultation is usually important. The employer should explain what change is proposed, why it is needed, when it would start and how it would affect employees.
Consultation should give employees a genuine opportunity to ask questions, raise concerns and suggest alternatives. It should not be a decision already made before the meeting starts.
Good consultation can help the employer identify practical issues before they become disputes. It can also help the business reach agreement more quickly.
Record employment contract variation in writing
Once an employment contract variation is agreed, it should be put in writing. Acas says it is a good idea to put all contract changes in writing so everyone is clear about what has been agreed.
Where the change affects the employee’s main written terms, the employer must put the change in writing within one month of the change. This can be done by letter, email, contract variation letter or updated contract.
The written record should be clear, specific and easy to understand. Vague wording creates room for disagreement later.
What should an employment contract variation letter include?
An employment contract variation letter should usually include:
- the employee’s name and job title
- the date of the letter
- the term being changed
- the previous term, where useful
- the new agreed term
- the date the change takes effect
- whether the change is permanent or temporary
- any review date or trial period
- any effect on pay, hours, duties, benefits or location
- confirmation that other terms remain unchanged
The letter should also explain how the employee confirms agreement. This may be by signing and returning a copy, replying by email, or another clear written acceptance process.
Temporary contract variation
Some changes are temporary. For example, an employer may agree a temporary change to working hours, a temporary homeworking arrangement or a short-term change in duties.
If the change is temporary, the written record should say so clearly. It should state when the arrangement starts, when it ends or will be reviewed, and what happens after the review.
Without clear wording, a temporary arrangement may later be argued to have become permanent.
Employment contract variation after flexible working
Flexible working requests often lead to contract changes. If an agreed flexible working arrangement changes the employee’s hours, working days, job location, pay or duties, it should usually be confirmed in writing.
Acas guidance on flexible working says that if any contract terms change, the employer must put the changes in writing within one month of agreeing them.
Employers should make sure the written variation matches the decision given to the employee and any flexible working policy used by the business.
Risks of poor contract variation records
Poor records can create real problems. The employer may later struggle to show what was agreed or whether the employee accepted the change.
Common risks include:
- arguments about whether the change was agreed
- uncertainty about whether the change is permanent
- disputes about pay, hours or benefits
- claims that the employer imposed changes unfairly
- grievances or breach of contract allegations
- confusion between contract terms and handbook policies
A clear written record helps reduce these risks and gives both sides certainty.
Practical checklist for employers
Before completing an employment contract variation, employers should ask:
- Has the existing contract been checked?
- Is the change contractual or only a policy change?
- Has the business reason been explained?
- Has the employee been consulted where needed?
- Has agreement been recorded clearly?
- Does the letter state what is changing?
- Does it say when the change starts?
- Does it confirm whether the change is temporary or permanent?
- Does it say other terms remain unchanged?
- Should legal advice be taken before the change is issued?
Getting employment contract variation right
Employment contract variation is common, but it should not be casual. Employers should be clear about the reason for the change, consult where needed and record agreed changes properly.
The safest approach is to avoid vague conversations and informal arrangements where important contractual terms are changing. Written confirmation helps prevent misunderstandings and gives the employer a stronger position if the change is later questioned.
Employers Law helps employers with employment contract variation, contract reviews, changing terms and workplace documentation. If you are changing employee terms, early advice can help reduce the risk of disputes.
For practical help changing employee terms, visit our changing contracts of employment page. For wider support, Employers Law also provides free employment law advice for employers across a full range of workplace issues.