Varying an employment contract in Australia may seem straightforward, but it carries legal implications that demand caution.
Whether you’re making changes due to business restructuring, role changes, or performance needs, any variation to an employment contract must comply with Australian employment law, including:
The Fair Work Act 2009 (Cth)
Modern Awards or Enterprise Agreements
Common law contract principles
In this article, our employment law team explains how to vary employment contracts legally, clearly, and safely – without exposing your business to claims like constructive dismissal or adverse action.
Key Takeaways
- Employment contracts can only be varied with genuine agreement from both parties and adequate consideration
- All changes should be clearly documented in writing
- The Fair Work Act 2009 (Cth) limits variations that reduce employee entitlements
Modern Awards and Enterprise Agreements often require formal consultation
Unilateral variations may be unlawful and lead to legal disputes
Understanding the Legal Framework for Contract Variations
Employers must consider both statutory and common law obligations when proposing changes to employment terms.
These legal frameworks operate concurrently and set the boundaries for what can and cannot be lawfully varied in an employment contract:
Common Law Principles
Under the common law, employment contracts can be varied only when a specific criteria are met:
1. Offer and Acceptance
There must be a clear proposal to change the contract terms and unequivocal acceptance from the other party.
2. Consideration
A contract variation requires something of value to be exchanged. For instance, if an employee is asked to work additional hours, a corresponding increase in pay or another benefit is usually required.
3. Intention to Create Legal Relations
The parties must intend for the variation to be legally binding.
These principles ensure that any variation is entered into voluntarily and not imposed unilaterally.
Fair Work Act Compliance
Under the Fair Work Act 2009 (Cth):
Any change that reduces conditions below Modern Award, Enterprise Agreement, or National Employment Standards (NES) minimums is void
Section 50 prohibits breaches of award or agreement obligations
This means contract changes cannot:
Reduce paid leave entitlements
Exceed maximum weekly hours without proper agreement
Undermine consultation obligations
Learn more in our Fair Work Act Guide for Employers.
Steps to lawfully vary an Employment Contract
To ensure compliance, employers should follow a structured process when varying an employment contract. The below outlines each key step along with the corresponding actions required at each stage:
1. Review the Existing Contract
Before proposing any changes, carefully examine the employment contract to determine whether it contains a variation clause. These clauses set out the process by which changes can be made, usually requiring written agreement signed by both parties.
Also look for ‘entire agreement’ clauses, which may void informal or verbal changes unless formally documented.
Assess whether the proposed variation affects fundamental terms such as pay, hours, or duties, which usually require stricter compliance with legal requirements.
It’s also important to understand if a Modern Award is applicable and the NES provisions such as minimum hours of work, leave entitlements, and maximum weekly hours.
Learn more about important employment contract clauses in our article.
2. Consult with the Employee
If a Modern Award or Enterprise Agreement applies:
Consultation is mandatory
Employers must notify employees of major changes, explain effects, and invite feedback
Even if not required, consultation builds trust and reduces risk of disputes.
Remember: Document all discussions and communications.
3. Ensure Consent Is Freely Given
An employment contract cannot be varied without the genuine consent of your employee.
This means the employee must:
Understand the changes
Have time to consider them
Face no pressure or coercion
Consent obtained through duress or misinformation can invalidate the variation.
4. Formalise the Variation in Writing
Once agreement is reached, the new terms should ideally be documented in a legally binding format.
Options include:
A Deed of Variation
A revised employment contract
Make sure to:
Reference the original contract
Clearly outline the changes
Specify the effective date
Ensure both parties sign and retain copies
5. Provide Valid Legal Consideration
Changes must be supported by something of value, such as:
A pay increase
Additional leave
Training or flexibility benefits
Watch out: Simply “keeping the job” may not count as valid consideration unless agreed to in writing.
6. Align Internal Systems and Notify Stakeholders
Operational systems must reflect the updated terms to ensure compliance.
This includes updating payroll systems, HR records, rostering software, and employment registers. It may also be necessary to inform third parties such as insurers or the applicable regulatory bodies if the variation affects superannuation, classification, or other aspects of the employment relationship.
Internally, ensure that managers and HR personnel are briefed on the change to avoid inconsistent application.
7. Avoid Unlawful or Unilateral Variations
Certain terms cannot be altered even with consent. These include:
NES minimums
Modern Award protections
Hours or duties
Doing so risks claims such as:
Breach of contract
Constructive dismissal
Drafting Tips for Employment Contract Variations
To minimise the potential for legal disputes when varying employment contracts, employers should ensure the variation of the employment contract is drafted well.
The table below outlines key drafting tips and explains how each helps ensure clarity, enforceability, and compliance.
| Tip | Why It Matters |
|---|---|
| Avoid oral agreements | Hard to prove, easily misinterpreted |
| Use clear, plain language | Reduces disputes over meaning |
| Specify the effective date | Ensures clarity for HR/payroll |
| Reference original clauses | Shows exactly what’s changing |
| Avoid retrospective changes | Risk of disputes and backpay claims |
| Tailor clauses to roles/Awards | Ensures legal alignment |
| Use consistent terms | Prevents ambiguity or contradictions |
| Attach as annexure | Keeps variation tied to the original contract |
| Provide examples of consideration | Reinforces legal enforceability |
| Seek legal advice or consult Fair Work | Avoids breaches of consultation obligations |
Learn Why Employment Contracts Should Be Drafted by Lawyers – Not Artificial Intelligence in our article.
Contract Variation Checklist
Here’s a quick checklist for varying employment contracts:
- Review the existing contract and identified applicable clauses
- Confirm no breach of NES or Award entitlements
- Consult with employee (especially where Award applies)
- Obtain written, voluntary agreement
- Document changes using a deed or updated contract
- Ensure legal consideration was provided
- Notify HR/payroll/stakeholders and updated internal systems
Frequently Asked Questions
Can an employment contract be varied by email exchange?
Yes, provided both parties clearly agree to the new terms in writing, an email exchange can constitute a valid contract variation under Australia law. However, best practice is to formalise changes in a signed document to avoid ambiguity.
Can casual employees have their contracts varied in the same way as permanent employees?
Yes, but with caution. Casual employment arrangements are inherently flexible, but any agreed changes to terms, such as regular hours or pay, should still be documented. Employers must also ensure variations do not inadvertently convert the relationship into permanent employment unless intended.
How should employers handle disagreements about proposed variations?
If an employee refuses to agree to a variation, the existing contract remains in force. Employers should not implement changes unilaterally. Instead, they should explore alternative solutions, consider restructuring options, or seek legal advice to avoid claims such as constructive dismissal or adverse action.
Can a probation period be extended by varying the contract?
Yes, a probation period can be extended if both employer and employee genuinely agree to the extension and the variation is properly documented. The extension must still comply with any applicable award, enterprise agreement or NES limits in Australia.
Do variations need to be lodged with the Fair Work Commission?
Generally, no. Variations to individual employment contracts do not need to be lodged. However, if the variation relates to an enterprise agreement, specific procedures and approval from the Fair Work Commission may apply.
