Wednesday, July 21, 2010

Negotiating renumeration changes in contracts

by Michelle McLoughlin of Michelle McLoughlin Solicitors

Varying or re-negotiating an employee’s contract of employment is a matter of contract law. Contract law prohibits any unilateral (one-sided) alteration of a fundamental term of a contract so in order to change the terms of a contract, there must be agreement by both sides to the contract.

Salary would be a fundamental term of employment and so, it cannot be cut unilaterally without an employee's agreement.

To minimise any risk of a claim it would be best to consult with employees, explain the circumstances leading to the employer’s proposal, ask the employees for alternatives to a reduction – are any employees prepared to work less hours, have they suggestions that will result in the same cost cuttings as an alternative to salary reductions etc., set out the consequences should the cost cutting measures not occur and obtain the employees' agreement to such variation and reduction in salary in writing.

Where a salary reduction is unilaterally imposed without any consultation or without the employees’ agreement, employees have a number of potential legal avenues available to them to seek redress:

• Claim breach of contract
• Claim unlawful deduction of wages
• Claim constructive dismissal
• Claim the existence of a trade dispute

Morale, trust and industrial relations within an organisation would also be impacted by any such unilateral action which can cause long term negative consequences to an organisation.

Michelle McLoughlin is a solicitor who specialises in providing corporate and employment law assistance. For further information Michelle can be contacted on 087 6674534, e-mail: .Website:

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