Demotion letter

Reducing someone's role, pay or status is a change to their contract. Unless the contract of employment gives a clear express right to demote, the employer cannot simply impose it. Doing so is a breach of contract and can amount to a constructive dismissal, an unlawful deduction from wages, or both.

This letter is therefore built around obtaining the employee's written agreement. It explains the decision and the reason, sets out the new role, the new pay and the terms that are not changing, says what the employee needs to do and by when, and encloses a short agreement to variation of contract for them to sign.

Read the contract first

Before anything is sent, read the contract of employment and the staff handbook. An express right to demote as a disciplinary sanction is not common, and where it exists it is usually narrower than the employer remembers. If it is not there, agreement is the only safe route.

Where the demotion is a disciplinary sanction

A fair procedure has to come first, in line with the Acas Code: an investigation, a written statement of the allegations, a hearing at which the employee had the right to be accompanied, and a right of appeal. A tribunal can adjust an award by up to 25 per cent where the Code is not followed.

Do not treat it as dismissal and re-engagement

Imposing the change by dismissing the employee and offering re-engagement on the new terms is a route that is closing. From 1 January 2027 dismissals used to impose restricted contractual changes become automatically unfair under the Employment Rights Act 2025. A change of role and pay should be handled by genuine agreement, recorded in writing.

Performance and ill health

Where the reason relates to performance or to ill health, consider whether a protected characteristic is in play and whether reasonable adjustments are needed before a demotion is proposed at all. Consider too whether a period of support or training would meet the need instead. A demotion that follows neither is difficult to defend.

What the letter covers

Options for demotion as a disciplinary outcome and demotion by mutual agreement. The new role. The new pay and other terms. The terms that do not change, which reassures and also avoids argument later. What the employee must do and by when. What happens if they do not agree. The right of appeal, and the support available. The enclosure is a signed agreement to variation of contract.

A demotion carries real risk of a breach of contract, unlawful deduction, constructive dismissal or discrimination claim, so have the letter and the process reviewed before sending.