Do all employees have to agree to a change to their contractual terms before the employer can implement the change?

An employer should attempt to obtain the agreement of all employees before implementing a change to their contractual terms. It should undertake a period of reasonable consultation, ensuring that it has a genuine business need to make the change. Obtaining employees' consent will be the option involving least legal risk, but the employer may have alternative options if not all employees agree to the change. 

If there is a flexibility clause in the employment contracts allowing the employer to implement the specific change, it can go ahead without the agreement of the employees, as long as it acts reasonably in doing so and has attempted to obtain agreement before relying on the flexibility clause. 

If there is no clause allowing the variation, the employer may decide to dismiss any employee who refuses to accept the new term or condition and offer to re-engage them on revised terms. An employer that is considering this option should ensure that it complies with the statutory code of practice on dismissal and re-engagement. The code recommends that dismissal and re-engagement should be treated as a last resort and that employers should contact Acas for advice before raising the prospect with employees.

The employer will have a duty to consult collectively with the employees' representatives if it is proposing to dismiss 20 or more employees within a period of 90 days or less. The employer must give the employees the correct amount of contractual notice. If the employees accept the offer of re-engagement on the revised terms, the new contracts will start the day after the notice expires.

Employees may have a claim for unfair dismissal, despite accepting an offer of re-engagement, if they have at least two years' continuous service. Where the employer has a genuine business need to make the change, it can rely on the dismissal being for "some other substantial reason" under s.98(1)(b) of the Employment Rights Act 1996, and argue that the dismissal was fair, as long as it followed a fair procedure.