If, as a cost-saving measure, an employer has awarded additional leave in place of an annual pay increase, can it withdraw the additional leave in subsequent years?

During an economic downturn many employers seek to keep costs down and may change the terms and conditions of their employees to help achieve this.

Whether or not an employer can withdraw additional annual leave awarded in place of an annual pay increase in subsequent years will depend on the nature of the initial agreement. If the initial agreement was a formal alteration of the employees' terms and conditions, the employer will have to change the employees' terms and conditions again formally. The employer should consult with the employees and seek their consent to the variation of their contracts back to the original terms and conditions. If the employees refuse to accept the change, the employer may be forced to dismiss them and re-engage them on the new terms. The employer would have to be able to show a tribunal that it had a business need for the change, permitting a finding that the dismissals were fair for "some other substantial reason".

Where the change was instituted with the agreement of the employees that it would be on a temporary basis, the employer will have an easier task in reinstating the old terms and conditions. If the agreement was reached on the basis that the status quo would be restored after a defined period or with a defined period of notice to the employees, the employer will be able to rely on this to implement the change. If the change was made on the basis that it would last for as long as necessary, the employer should consult with the employees and explain that the temporary measures are no longer necessary and that the status quo is to be restored.