For most employers, breach of contract isn’t usually the result of a deliberate decision. More often, it arises from operational pressure – a quick call made during a resignation, a change implemented at pace, or an assumption that a reasonable step will be legally sound.
For HR professionals, the challenge is less about understanding the concept and more about managing the grey areas – where contractual terms, business needs, and evolving working practices don’t always align neatly.
This article looks at where breach of contract risks typically arise in practice, and how to manage them effectively.
The scope of the employment contract: more than the written terms
One of the most common pressure points is the scope of the contract itself.
While the written agreement remains central, it is rarely the full picture. Contractual obligations may also arise from:
- Policies and procedures, particularly where wording suggests they are binding
- Implied terms, including mutual trust and confidence
- Custom and practice, where consistent behaviour has created an expectation
Where risk tends to materialise
In most cases, breach of contract issues emerge from relatively routine decisions rather than contentious disputes.
Typical scenarios include:
- Managing exits – particularly around notice, garden leave, or summary dismissal
- Pay-related decisions, including bonus entitlement, holiday pay, and deductions
- Implementing changes to role, responsibilities, or working patterns
- Suspension decisions, especially where pay is withheld
- Procedural missteps, such as not following contractual disciplinary or redundancy processes
Claims in practice: a financial lens
Breach of contract claims in the Employment Tribunal remain relatively contained in scope. The Tribunal will focus on quantifiable financial loss – for example:
- Notice pay
- Unpaid wages or holiday
- Bonus or commission entitlements
- Contractual benefits
Employer counterclaims and set-off
Although employers cannot bring standalone breach of contract claims in the Tribunal, they are not without recourse.
Where an employee brings a claim, employers may:
- Issue a counterclaim for sums owed, such as overpayments or training costs
- Rely on set-off, where mutual liabilities exist under the contract
Managing risk: a practical approach
For HR professionals, the focus is less on avoiding obvious breaches and more on managing risk at the margins.
Key considerations include:
- Ensuring contractual documentation aligns with how the business actually operates
- Maintaining clarity around which policies are contractual and which are discretionary
- Supporting managers to understand the contractual implications of day-to-day decisions
- Avoiding informal commitments that may inadvertently create enforceable terms
- Sense-checking high-risk decisions – particularly around pay and termination – before action is taken
