Understanding How to Write an Employment Contract Variation Letter

What is an Employment Contract Variation Letter?

A variation letter, also known as a letter of variation or contract variation letter, is a formal document that outlines changes to an existing employment contract. It is a critical tool for ensuring that both the employer and employee have a clear, mutual understanding of any new terms or amendments to the contract.

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.

In this guide, we will go over what needs to be included, the template, how to store and send these contract variation letters, pitfalls, and lots more.

Benefits of Employment Contract Letters

☑ Contract variation letters provide you with a legal framework for changes, ensuring that both parties are protected under the law. This is particularly important for compliance with specific employment laws and regulations.

☑ By clearly outlining the changes to the contract, these letters ensure that both the employer and the employee are fully aware of the new terms - which reduces misunderstandings or disputes.

☑ They allow for adjustments to employment contracts to accommodate changing business needs, market conditions, or even employee circumstances - offering you the flexibility to adapt to evolving situations.

☑ Serving as a formal record of agreed changes, these letters are essential for maintaining accurate employment records. They can be crucial in resolving any future disputes or misunderstandings that need to go to a hearing down the line, for instance.

☑ Contract variation letters require the consent of both parties, ensuring that changes are mutually agreed upon and not unilaterally imposed.

☑ By formalising changes professionally and transparently, these letters help maintain a positive employer-employee relationship - promoting both transparency and trust.

Table of Contents

• When should you use an employment contract variation letter?

• Why is an employment contract variation letter important?

• What Should be Included in a Contract Variation Letter?

• So, How Do You Write a Contract Variation Letter?

• How Can You Efficiently Manage the Storage of Your Contract Variation Letters?

• The Significance of Contract Variations & the Law

• Key Considerations When Drafting a Consideration Letter

• What are the common pitfalls of an employment contract variation letter?

• Are Contract Variations Legally Binding?

• How Do I Request a Variation in a Contract?

• Can a Contract be Varied Verbally?

• How Does a Variation Affect the Original Contract?

• Can a Contract be Varied Without Consent?

• What Happens if One Party Does Not Agree to a Contract Variation?

• Can a Variation be Reversed?

• Is There a Limit to the Number of Variations a Contract Can Have?

• What is the Difference Between a Contract Amendment and a Variation?

When should you use an employment contract variation letter?

Whilst amendments - or variations - to employment contracts do not strictly need to be in writing, it is strongly recommended 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 significant changes to employment contract law in countries such as the UK and EU), 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 essential for several reasons, such as:

Removes Uncertainty

There is no uncertainty or dispute about what change to the terms has been agreed upon or when it is effective.

Reduces the Risk of Disputes

With a written employment contract variation letter in place, there will be less likely to be a dispute between the employer and employee either during the employment - or after the job ends - about what the employer and employer agreed. 

For instance, these disagreements could stem from what change in terms was agreed upon - particularly where verbal discussions have taken place over a period of time. 

Reduces Confusion

It also helps to reduce confusion, avoids ambiguity or uncertainty, and gives everyone clarity and peace of mind.

Provides The Employer With Adequate Protection

Provided that all necessary parts of the employment contract are updated (in particular, taking into account April 2020 changes, which are seen further above and below), the employment contract will remain legally compliant and fit for purpose.

Encourages Good Working Relationships

It encourages good relationships between the employer and employee. It shows the employee, for instance, that their employer is serious about getting things right.

What Should be Included in a Contract Variation Letter?

You should include details of the proposed changes, the effective date, and a request for consent, along with reference to the original contract.

So, How Do You Write a Contract Variation Letter?

Writing a contract variation letter involves a careful balance between clarity, legal precision, and mutual agreement. Here's a step-by-step contract variation guide on how to compose an effective amendment letter:

1. Start with Basic Information

You should begin your letter by including the current date to mark its relevance. 

The subject line should also be clear and direct to inform your employee of the letter's purpose immediately. 

Next, you want to address the letter specifically to the individual - or even department concerned - with the contractual matters and include your own contact details for them to reference quickly.

2. Reference the Original Contract

In this section, it is essential to reference the original contract by mentioning its signing date and any unique identifying numbers - this helps to clarify what is being changed.

For instance, you could provide a brief background to set the context, explaining why a variation to the original contract is being proposed. 

This helps establish the continuity and relevance of the variation in relation to the original agreement.

3. Clearly State the Proposed Changes

Detail the specific changes you propose in the contract with precision and clarity. 

This could include, for instance, alterations to the contract regarding:

1. Terms

2. Conditions

3. Responsibilities

4. Other aspects

Furthermore, please specify the effective date of these changes to avoid any confusion. 

Additionally, offering reasons for these changes, although not mandatory, can aid in mutual understanding and a much smoother agreement.

4. Legal Considerations

Next, you will want to ensure that your proposed changes comply with relevant laws and regulations, reinforcing the legal validity of the letter.

You can do this by emphasising that these changes require mutual agreement and are not unilaterally enforced, underlining the importance of consent and collaborative decision-making in the process.

5. Seek Acknowledgement and Consent

Once your letter is drafted and you are happy it meets all the legal requirements, explicitly request the recipient to review the proposed changes, agree to them, and provide their consent by signing the letter. 

This will serve as a formal acknowledgement of the agreed-upon variations.

How Can You Efficiently Manage the Storage of Your Contract Variation Letters?

One way is to print it out and hope it doesn't get lost; another way is to keep it in your emails and wish it does not get deleted.

Alternatively, you can look to use the Pocketlaw platform to securely store your Contract Variation templates and use the platform for designates, which can then be logged and tracked.

The Significance of Contract Variations & the Law

Contract variations must rigorously adhere to employment law to safeguard the rights and interests of both parties involved. 

This compliance ensures that any alterations to the contract terms are legally sound and enforceable - preventing potential legal disputes.

As a result, it is crucial that these changes respect statutory rights, such as minimum wage and working hours, and are mutually agreed upon, reflecting a balance of power and fairness in the employer-employee relationship, to name just a couple of the aspects you need to factor in.

Key Considerations When Drafting a Contact Variation Letter

When drafting a contract variation, it's imperative to ensure compliance with employment laws and regulations - including those specific to contract employment in the local jurisdictions that could be involved if a dispute were to occur.

Consequently, articulating changes clearly and unambiguously is crucial to avoid confusion, and maintaining copies of all variations is essential for future reference and record-keeping - safeguarding both parties' interests in the long term.

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 upon in writing to avoid any misunderstandings or disputes about what was agreed upon.

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 is. Signed contract variations can quickly and easily be saved on the Pocketlaw CLM so that they are securely stored.

Are Contract Variations Legally Binding?

Yes, provided they are made in accordance with relevant laws and both parties give their consent, contract variations are legally binding.

How Do I Request a Variation in a Contract?

Suppose you are an employee wanting a change to your contract. In that case, you will need to submit a written request to your employer detailing the proposed changes and reasons for them and seeking their agreement.

Can a Contract be Varied Verbally?

While verbal agreements can be considered binding, it is much safer and advisable to document variations in writing to ensure clarity and avoid disputes down the line.

Do I Need a Lawyer or a Solicitor to Vary a Contract?

While only sometimes necessary, consulting a legal professional can ensure that the variation complies with all legal requirements and protects your interests.

How Does a Variation Affect the Original Contract?

A variation only alters specific terms of the original contract - but generally leaves the rest of the contract unchanged.

If you find that more than just specific terms are being changed, a new employment contract or agreement may be in order.

Can a Contract be Varied Without Consent?

No variations require the mutual consent of all parties to the contract.

What Happens if One Party Does Not Agree to a Contract Variation?

If one party does not agree, the variation cannot be enforced, and the original contract terms will remain in effect.

Can a Variation be Reversed?

Yes, if all parties agree, a variation can be reversed or further varied at a later date.

Is There a Limit to the Number of Variations a Contract Can Have?

There is no legal limit, but excessive variations might indicate a need for a new contract or a comprehensive review would be better suited.

What is the Difference Between a Contract Amendment and a Variation?

The terms are often used interchangeably, but typically, an amendment refers to a formal change to the contract's terms. In contrast, a variation might be used for more minor adjustments.