Where an employer is looking to vary the terms of an employee’s contract of employment, they should do so with the employee’s permission. But what happens if they’re looking to introduce less favourable terms, which the employee isn’t happy with? This is where ‘fire and rehire’ steps in.
This article will outline what fire and rehire is, and how employers strategically use it to implement new terms into a contract of employment.
What is ‘fire and rehire’?
The nuclear option for an employer who wants to break the deadlock is to dismiss the employee(s) who won’t accept new terms and accompany the dismissal with a final offer of those terms. The ball is then in the employee’s court to decide whether to bring an unfair dismissal claim or accept the job offer.
Under section 98 of the Employment Rights Act 1996 (ERA), there are five potentially fair reasons for a dismissal. These are:
- Capability or qualifications
- Conduct
- Redundancy
- Breach of a statutory restriction; and
- “Some other substantial reason of a kind as to justify the dismissal” (SOSR).
SOSR acts as a ‘catch-all’ potentially fair reason for dismissal; it is under SOSR that fire and rehire can operate legally.
Employers use ‘fire and rehire’, also known as dismissal and reengagement, to vary the terms of an employee’s contract; this is typically seen where the employee does not agree to some, or all, of the contractual changes proposed by the employer. As the name suggests, they do this by firing the individual, and rehiring them on different contractual terms.
The new Code of Practice for fire and rehire
On 18 July 2024, a new Code of Practice (CoP) came into force, which provides guidance to employers wishing to use the fire and rehire process. This CoP makes a few changes to the fire and rehire process, with the most notable being that an employer must alert the Advisory, Conciliation and Arbitration Service (ACAS) in writing if they wish to dismiss and rehire 15 or more employees within 30 days.
The fire and rehire process
Fire and rehire should only be used as a last resort; employers must take reasonable steps to consider all alternatives before landing on fire and rehire. Some of these alternatives may be:
- Voluntary redundancy
- Reduced working hours
- Temporary pay cuts
- Renegotiating contact terms with the employee’s consent.
The first hurdle that an employer must jump is to provide relevant information regarding the fire and rehire process to the employee. This information should be provided as early as reasonably possible, as it enables the employee to understand the reasons for the proposed changes.
It’s important for the employer to engage in meaningful consultation with the relevant employee throughout this process; to do so, they should engage with each other openly and in good faith, and the employer should remain as transparent as possible.
The new Code highlights that even where the employer believes an employee is unlikely to agree to the proposed changes, the employer should still consult for as long as possible with the view to reaching an agreed outcome. If no other alternative is viable and proper consultation has occurred, then the employer may move to fire and rehire.
At this point, the employer must give the employee their notice period and should consider whether there is any practical support they could offer to the employee; this could include relocation assistance, career coaching or emotional support.
Finally, the employer should set out the new terms of employment in writing and must re-engage the relevant employee as soon as reasonably practicable.
Labour’s changes to fire and rehire
Whilst fire and rehire currently remains legal in England and Wales, Labour have outlines plans to change this in the near future.
In Labour’s Plan to Make Work Pay, the government has condemned the use of fire and rehire tactics, deeming them to put working people “at the mercy of bullying threats”. Because of this, Labour have pledged to end the practice of fire and rehire and replace the current CoP with a strengthened one. If this change is in fact implemented, then the most recent code of practice will be very short-lived indeed.
But the devil is in the detail. If employers can’t use fire and re-hire then were does the balance of power lie when employees won’t accept changes? It seems obvious that where there is decreased competition for an industry’s products or services, there will be less money available with which to pay employees but the need for staffing may not decrease, so employers won’t be able to use redundancy. In that case, is the employer bound to overpay staff until it goes under? We shall see what the proposal’s details are.
Conclusion
Overall, fire and rehire tactics allow employers to maintain control by varying the terms of an employee’s contract of employment under certain circumstances. Despite this, the new Labour Government have expressed their disdain towards fire and rehire strategies and may reduce or entirely remove an employers ability to do so in the near future.