Many organisations introduced additional flexibility and wellbeing initiatives during and after the pandemic. Extra leave, early finishes, wellbeing days and enhanced hybrid working arrangements became common features. As economic pressures increase and employers seek greater productivity, some are now reassessing whether those benefits remain sustainable.
Most recently, KPMG attracted attention when it withdrew its summer “Jump Start” programme, which allowed employees to finish early on Fridays during the summer months.
The move highlights a wider question for employers: how easy is it to withdraw a benefit once employees have become accustomed to it?
Is the benefit truly discretionary or has it become contractual?
The starting point is to determine whether the benefit remains genuinely discretionary or whether it has become part of employees’ terms and conditions.
Employment Tribunals have long recognised that contractual terms can arise through custom and practice. Even if not referred in the written contract of employment or a contractual policy, a benefit that is provided consistently over a significant period, applied uniformly across the workforce and treated as an entitlement may become incorporated into the employment contract.
Whether that has happened will depend on the particular facts. Relevant considerations are likely to include:
- how long the benefit has been provided;
- whether it has been applied consistently;
- the extent to which employees have come to rely on it;
- how the benefit has been communicated by the employer; and
- whether the employer has reserved the right to amend or withdraw it.
Simply continuing a discretionary benefit for a number of years will not automatically make it contractual. The key question is whether the employer’s conduct objectively demonstrates an intention that the benefit should form part of the contractual relationship.
However, the longer a benefit has existed and the more consistently it has been applied, the more difficult it may become for an employer to argue that it remains entirely discretionary.
Employee relations considerations
Even where a benefit has not become contractual, employee relations considerations remain important. Removing a popular benefit can have a disproportionate impact on morale, engagement and retention. In 2023, Lloyds Banking Group told remote teams that they would have to work in the office for two days a week. Following the change, Lloyd’s employee index showed that satisfaction levels dropped by 12%.
In practice, the greatest risk often stems not from the decision itself, but from the way in which it is communicated and implemented. Employers should consider explaining the commercial rationale, engaging with employee feedback and providing adequate notice. A transparent consultation process, even where it is not legally required, is often more effective than presenting the decision as a done deal.
Contractual benefits
Where a benefit is contractual, the risks associated with its removal become more significant.
Absent an express contractual right to make the change, an employer generally has three options: seek employee agreement, impose the change unilaterally, or dismiss and re-engage employees on revised terms.
If an employer unilaterally withdraws a contractual benefit, an employee who objects may continue working under protest and pursue a claim for breach of contract or, where applicable, unlawful deductions from wages. Alternatively, if the change amounts to a repudiatory breach of contract, the employee may resign and claim constructive unfair dismissal.
The position will become even more challenging from January 2027, when provisions of the Employment Rights Act 2025 relating to dismissal and re-engagement come into force. The legislation will make it automatically unfair to dismiss an employee in order to impose certain “restricted variations” to contractual terms, unless the employer can satisfy a narrow financial difficulty exception. These restricted variations can include detrimental changes to contractual benefits.
Employers considering changes to contractual benefits should review their contractual documentation and change management processes now. While carefully drafted variation clauses remain important, they are unlikely to remove the need for meaningful consultation or employee agreement where significant contractual benefits are affected.
Conclusion
The KPMG story is unlikely to be the last of its kind. The current economic climate and continued recalibration following the pandemic means many organisations will continue to review employment costs and workplace benefits. The legal and reputational risks of getting benefit changes wrong will only grow, particularly once the Employment Rights Act 2025 ‘fire and rehire’ provisions come into force in January 2027.
Employers should be careful not to assume that a benefit can be removed simply because it began its life as a discretionary perk. Over time, practices can become embedded within the employment relationship, creating both legal and employee relations risks.
If employers decide to change or remove a benefit, they should ensure they have taken the necessary steps to do so lawfully and sensitively. Careful planning, clear communication and meaningful consultation remain the most effective tools for managing change while minimising risk.