Look at your standard employment contract template. There's a good chance it contains a line along the lines of "the Company reserves the right to vary your terms and conditions of employment." Most SME templates have carried a clause like that for years, and until now it's been treated as a harmless piece of boilerplate.
From January 2027, it may not be harmless at all.
Once the restricted variation rules come into force, inserting a unilateral variation clause that allows changes to pay, hours, pension or leave without the employee's agreement will itself count as a restricted variation. In practical terms, the very clause many employers rely on to give themselves flexibility is at risk of becoming the trigger for automatic unfair dismissal exposure, if it's used to justify dismissing someone who won't accept a change. Existing flexibility clauses agreed before the rules commence appear set to be treated differently to newly inserted ones, but the detail here is still developing, and any employer updating a template now needs to draft with the new regime in mind rather than the old one.
This is a genuine drafting problem, not just a policy one. A contract clause that looked sensible in 2022 can be a liability in 2027 without a single word of it having changed, purely because the law around how it can be used has moved.
Before you next issue a new contract, or before you rely on an existing flexibility clause to push through a change, work through this.
- Audit every contract template for variation language that touches pay, hours, pension or leave
- Work out which of your planned or likely future changes count as restricted variations and which don't
- Build a proper consultation process template now, rather than drafting one under time pressure when you actually need it
- If financial distress is genuinely part of your reasoning for a change, start building the documentary evidence trail now, not after the fact
- Check whether any proposed change affects 20 or more staff at one site, which triggers collective consultation and HR1 notification obligations
The old approach of quietly relying on a flexibility clause to push through unpopular changes is going to be far riskier from January 2027 onwards. Get your contracts reviewed before you need to use them. Neathouse Partners offers a fixed-fee contract audit: call 0333 041 1094 or visit neathousepartners.com.
General Guidance Only. Not Legal Advice.
See Getting Employment Contracts Right for more information.
