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New contracts for existing employees - when, why and how, and what do we do if people refuse to sign them?

From time to time it becomes necessary to replace employment contracts, but our experience of numerous repeats of this exercise with various employers has enabled us to frame the basic issues for all those contemplating doing so in the future.

From time to time it becomes necessary to replace employment contracts, but our experience of numerous repeats of this exercise with various employers has enabled us to frame the basic issues for all those contemplating doing so in the future.

Firstly it’s important to be clear on when new contracts are necessary….it’s easier perhaps to identify circumstances when it is not necessary to issue a whole new contract:

  • A pay rise
  • A change of hours
  • Granting a flexible working request
  • A change of premises

In all of the above examples it would be much more sensible to issue a simple change of terms letter, highlighting the change, when it applies and concluding with the wizened words "all of your other terms and conditions of employment remain unchanged." We also like to finish with some warm words of thanks for continuing commitment etc. If you have a contract with myHRdept, we’ll be happy to draft these letters for you when the time comes.

Now and again it becomes necessary to replace contracts lock stock and barrel, and normally this arises when contracts are very out of date (and employee personnel files are full of change letters.) This can happen when we take on a new client in which case we’ll look at their existing contract in the context of the what the organisation actually does and decide whether or not it is actually fit for purpose, by which I mean does it offer the flexibility required, the necessary protections and does it in itself present an unnecessary risk to the business. The latter can arise for example from contracts (typically drafted by lawyers) that include contractual disciplinary procedures. Our experience of small organisations is that they find it very difficult following disciplinary procedures and so in making them contractual the business becomes exposed to breach of contract claims. The remedy to this is simple, draft a new contract, make it clear that these procedures are non contractual.

Having addressed why and when we sometimes need new contracts (and when we don’t) I will turn to the ‘how’ and our top tips for achieving a successful outcome.

  • Be very clear on all of the existing terms and list them.
  • Do not seek to change any term unless you have good reason to do so and have taken advice.
  • If you are introducing a new requirement (e.g. a restrictive covenant) you will need to provide something ‘in consideration’ otherwise it won’t be binding (even if the employee agrees it).
  • Explain carefully to employees why you are changing contracts – consider using a low risk guinea pig.
  • Give employees plenty of time to read the new contracts and come back to you with questions, but do set a deadline date.
  • LISTEN to the questions and be prepared to adapt/make changes (usually to everyone’s, not just the person raising the issue).

Finally, what if the person refuses to sign? It happens, even in situations where we’re not seeking to make any changes to terms. I am not going to address situations where we seeking to make changes, as each case is fact sensitive (though I will assure you there are ways to do it lawfully and safely) but in circumstances where we are not making any changes save for the overall tidiness and general wording on new contracts here is what we suggest you do:

  • Meet with the employee to discuss the reasons why they don’t want to sign, and if no good reason is given;
  • Provide (and confirm in writing) the employee with a generous additional window of time (at least the same length as their notice period) to either sign it, or confirm the reasons why they won’t, and assuming no good reasons are given;
  • Write to them again at the end of that period to confirm that the contract though unsigned is binding as of that date.

We always suggest you take advice before closing on that particular route as clearly this article is intended to be a general guide, not a substitute for advice on a particular case.

If you're thinking of outsourcing your HR why not contact myhrdept.co.uk. With full service Premium Plus packages from only £120 per month (and start-up packages from just £70 per month) and fixed price HR support options available for one-off issues, we believe we offer the best combination of quality and price available in the UK. Call us on 01628 820515 to discuss your requirements email us and we’ll call you back.

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