Employment contract - variation letter
A employment contract variation letter is an agreement used to amend or vary the terms of an existing employment contract by mutual consent of the employer and employee.
What is an employment contract variation letter?
An employment contract variation letter is an agreement used to amend or vary the terms of an existing employment contract by mutual consent of the employer and employee. In other words, where the parties agree to do something differently from what was originally agreed, whilst the remainder of the original agreement terms remain the same.
When should you use an employment contract variation letter?
Whilst amendments or variations to employment contracts do not strictly need to be in writing, we would strongly recommend that agreed changes be in writing to ensure clarity and transparency. This is particularly important when there is a change in remuneration, notice period or post-termination obligations.
If the amendments or variations are substantial, or if the original employment contract was created prior to April 2020 (when there were substantial changes to employment contract law) the employer should consider if a new employment contract should be entered into instead of this employment contract variation letter.
Why is an employment contract variation letter important?
Having a written agreement documenting the change in the employment contract is important because:
There is no uncertainty or dispute about what change to the terms has been agreed, or when it is effective from. Without a written employment contract variation letter in place, it is far more likely that there will be a dispute between the employer and employee either during the employment or after the employment ends about what the employer and employer agreed i.e. what change in terms was agreed, particularly where verbal discussions have taken place over a period of time. It reduces confusion, avoids ambiguity or uncertainty and gives everyone clarity and peace of mind.
The employer is adequately protected. Provided that all necessary parts of the employment contract are updated (in particular taking into account April 2020 changes, to which see further above and below) the employment contract will remain legally compliant and fit for purpose.
It encourages good relationships between the employer and employee. It shows the employee that their employer is serious about getting things right.
What are the common pitfalls of an employment contract variation letter?
Not documenting the variation in writing
As explained above, changes to an employment contract should be confirmed and agreed in writing, to avoid any misunderstandings or dispute about what was agreed.
Not updating the rest of the contract
As explained above, if the original employment contract was created prior to April 2020 (when there were substantial changes to employment contract law) the employer should enter into a new employment contract reflecting both the changes to the law in April 2020 and the agreed variations of the employment contract.
Losing the signed copy
Without a signed copy of the employment contract variation letter, there is no evidence of what the change in the agreed terms and conditions of the employment are. Signed contract variations can quickly and easily be saved on the PocketLaw platform so that they are securely stored.
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