Variation of Contractual Terms in Employment Contracts

Variation of Contractual Terms in Employment Contracts

This could range from removing and /or reducing benefits such as 13th month bonus, imposing longer hours of work / more working days in a week, medical benefits, temporary shut downs or changes to leave provisions to name a few.

It is common for employers to incorporate a clause in a contract allowing for variation to happen at any time. The big question would be whether the clause itself is sufficient for employers to unilaterally vary existing terms and conditions.

Generally, variation of contract can be divided into two forms – variation for the better of an employee or otherwise.

Variation of contractual terms for the better would apply in a situation where the amended terms would be more favourable to the employees compared to the existing terms. A good example of this would be pay rise, promotion, bonus, reducing working days and etc.

Common sense would suggest that in these instances, employers are not required to obtain consent from their employees because who would oppose to an additional benefit anyway?

However, when the variation of contractual terms brings about a detriment to the employee, then the employer is required to obtain consent from their employees to vary their employment contracts. This situation brings about a different perspective altogether as decided case laws in Malaysia suggest that a unilateral variation (or one that is managed unprofessionally) may put an employer at risk of breach of contract under which the employees would have an avenue to claim constructive dismissal and seek for reinstatement to their former terms of employment contract under the Industrial Relations Act 1967.

If you are having concerns around this area, the prudent thing to do as an employer is to ensure that you have justifications for the proposed variation and that you present a convincing case to get buy-in from employees. Remember, it is not about an instant cost reduction. Special emphasis must be placed on managing the employment climate thereafter. Effective town halls and consistent communication strategies are always keys in determining success.

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