Free coffee. Early Friday finishes. An extra day off for your birthday. Flexible working that goes beyond the legal minimum.
Workplace perks like these have become increasingly popular – especially since the pandemic, when many employers introduced new benefits to support their teams through a difficult time.
But what happens when the business landscape changes and you need to tighten the purse strings? Can you simply withdraw a perk that was never meant to be permanent?
The answer isn’t always straightforward. What starts as a goodwill gesture can, over time, become something employees are legally entitled to. And removing it without proper process could land you in hot water.
In this blog, we’ll explain how workplace perks can become contractual benefits, what the risks are, and how you can protect your business while still being a great employer.
What’s the Difference Between a Perk and a Contractual Benefit?
Before we go any further, it’s worth understanding the distinction between these two things.
A discretionary perk is something you offer as an extra – a nice-to-have that you can change or remove at any time. Think of it as a gift rather than a promise.
A contractual benefit is different. It’s something the employee is legally entitled to, either because it’s written into their contract or because it has become an implied term of their employment.
Examples of perks that often start as discretionary include:
- Free tea and coffee
- Dress-down Fridays
- Early finishes before bank holidays
- Enhanced sick pay above the statutory minimum
- Birthday leave
- Gym memberships or wellness allowances
The problem arises when employees start to see these perks as part of their deal – something they expect and rely on. At that point, the line between “perk” and “contractual benefit” becomes blurred.
How Can a Perk Become a Contractual Benefit?
Even if something isn’t written into an employment contract, it can still become legally binding through what’s known as custom and practice.
This happens when a benefit has been provided so consistently and for so long that it’s reasonable for employees to assume it’s part of their terms of employment.
Several factors influence whether a perk has crossed this line:
- Consistency
Has the benefit been applied the same way, to the same people, every time? If you’ve let everyone leave at 3pm on Christmas Eve for the past five years without exception, that’s more likely to be seen as an implied term than something you did once or twice.
- How It Was Communicated
Was the perk described as discretionary, or did it look and sound like a permanent entitlement? If your employee handbook says “all staff receive an additional wellbeing day each year” without any caveat, that’s a stronger indication it’s contractual.
- Length of Time
The longer a benefit has been in place, the harder it is to argue it was never meant to be permanent. There’s no magic number of years, but duration does matter.
- Employee Reliance
Have employees made decisions based on this benefit? For example, if someone turned down another job partly because of your enhanced parental leave policy, that reliance could strengthen their argument.
- Whether It’s Been Challenged Before
If you’ve previously tried to remove a benefit and backed down after employee pushback, that could suggest even you considered it to be more than discretionary.
The Risks of Getting It Wrong
Removing a benefit that employees consider contractual – even if you never intended it to be – can create real problems for your business.
Breach of Contract Claims
If an employee believes you’ve taken away something they were entitled to, they could bring a breach of contract claim against you. This could result in compensation for any financial loss they’ve suffered.
Constructive Dismissal
In more serious cases, an employee might argue that your actions amounted to a fundamental breach of their contract – giving them grounds to resign and claim constructive dismissal at an employment tribunal.
Damage to Trust and Morale
Even if things don’t escalate to a legal dispute, removing perks without proper consultation can seriously damage the relationship between you and your team. People remember when something is taken away – often more than they remember when it was given.
How to Protect Your Business
None of this means you shouldn’t offer perks. Workplace benefits are a brilliant way to attract and keep good people, and they can do wonders for your culture.
But you do need to be careful about how you set them up – especially if you want the flexibility to change or remove them later.
Here’s how to protect yourself:
Be Clear From the Start
Whenever you introduce a new benefit, make it clear in writing that it’s discretionary and can be changed or withdrawn at any time. This doesn’t have to be cold or legalistic – just honest.
For example: “We’re pleased to offer an additional wellbeing day each year as a discretionary benefit. This is subject to review and may be amended or withdrawn at the company’s discretion.”
Put It in the Right Place
Discretionary benefits are usually better placed in a separate policy document or staff handbook rather than the employment contract itself. Contracts are harder to change, so keep them for the essentials.
Review Regularly
Don’t let your contracts and policies gather dust. Review them at least once a year to make sure they still reflect what you’re actually offering – and that the wording is clear.
Document Everything
Keep records of when benefits were introduced, how they were communicated, and any changes you’ve made along the way. If a dispute arises later, this evidence could be invaluable.
What If You Need to Remove a Benefit?
Sometimes, business circumstances change and you genuinely need to cut back on what you’re offering. That’s understandable – but how you handle it matters.
Step 1: Assess Whether It’s Contractual
Before you do anything, work out whether the benefit in question has become a contractual entitlement. Consider the factors we discussed earlier – consistency, communication, duration, and reliance.
If you’re not sure, it’s worth getting professional advice before taking action.
Step 2: Consult With Your Employees
Even if you’re confident the benefit is discretionary, it’s good practice to consult with affected employees before making changes. Explain why the change is happening and give them a chance to ask questions or raise concerns.
This won’t just reduce the risk of legal issues – it’ll also help maintain trust.
Step 3: Consider Alternatives
Can you phase out the benefit gradually rather than removing it overnight? Could you offer something else in its place? A bit of flexibility here can go a long way.
Step 4: Communicate Clearly
Once a decision is made, confirm it in writing. Be clear about what’s changing, when it’s changing, and why. Avoid corporate waffle – just be straight with people.
Step 5: Update Your Documentation
Make sure your contracts, policies, and handbooks are updated to reflect the change. This helps avoid confusion down the line.
Frequently Asked Questions
Can an employer remove a perk without consultation?
If the perk is genuinely discretionary and clearly labelled as such, you may be able to remove it without formal consultation. However, it’s almost always better to communicate with your team first – both for legal protection and to maintain a good working relationship.
How long does a perk need to be in place before it becomes contractual?
There’s no fixed timeframe. It depends on a combination of factors including consistency, how it was communicated, and whether employees have come to rely on it. A benefit provided for several years with no indication it was temporary is more likely to be seen as contractual than something offered once or twice.
What’s the difference between a policy and a contract term?
A contract term is a legally binding part of the employment relationship. A policy is typically a set of guidelines that can be updated more easily. However, if a policy is referenced in the contract or applied so consistently that employees rely on it, parts of it could become contractual.
In Short
Offering perks is one of the best ways to create a workplace where people want to stay. But without clear communication and proper documentation, those perks can take on a life of their own.
The key is to be upfront from the start. If a benefit is discretionary, say so. If you need to make changes, consult properly. And if you’re ever unsure where you stand, get advice before you act.
Need help reviewing your contracts or policies? We’re here to help, get in touch for a free initial chat.
