Are you prepared for stricter rules regarding firing and rehiring?

It can be occasionally necessary for employers to change employees’ terms and conditions, to align with their changing business and economic factors. Employers who wish to alter employees’ terms require their agreement, often through consultation, which may extend to collective consultation for significant changes impacting 20 or more employees. If consensus isn’t achieved, employers may resort to firing and rehiring, which is dismissing employees and offering re-engagement on revised terms.

Implementing firing and rehiring

One of the tools in an employer’s arsenal, if agreement cannot be reached, is to dismiss the employees and offer them re-engagement on the new, proposed terms, which has become known as ‘fire and rehire’.

Fire and rehire has, however, received particularly bad press following its use by several big-name companies. This has resulted in the government announcing a crackdown on unscrupulous employers who are using the tactic to bully employees into accepting worse terms and conditions.

A new ACAS Code of Practice is therefore being introduced, which employers should follow when seeking to change employees’ terms and conditions.

The draft Code of Practice was published last year and, following consultation, an updated version has now been published. We expect this will be approved by parliament and be in place in the latter part of 2024.

Key elements employers need to be aware of

• The Code will apply both where fire and rehire is being considered as a standalone option and where redundancy and where fire and rehire are both being considered as options;
• Fire and rehire should only be used as a last resort after employers have explored all the alternatives and held meaningful discussions with employees and trade unions, with a view to reaching agreement;
• Employers should contact ACAS at an early stage, before raising fire and rehire with the workforce;
• Giving the employees’ information in writing and phasing in the changes are both recommended as best practice;
• Employers must not inform employees that they will be dismissed if they do not agree to the new terms and conditions, and they should not raise fire and rehire if this is not an actual option.  We always recommend that employers state that this could be considered but not that it will be a fait accompli, as it may be possible to reach compromise or agree on alternative options;
• Employers must consult ‘for as long as reasonably possible’ about proposed changes.  This would mean a minimum of 30 days if more than 20 employees at one workplace location (or 45 days if 100 or more are affected).  There may be a bit more flexibility for consultations with smaller numbers of employees as no minimum or maximum timescales are specified.

While ACAS Codes of Practice are guidelines and not binding statutory requirements, tribunals do take any failure to follow them into account when considering cases and have a power to uplift any compensation by up to 25%.

We will provide updates regarding any news on fire and rehire as developments occur. It’s worth noting that critics are already suggesting that the code does not go far enough in terms of tackling the practice and the labour party is currently proposing, if elected, to ban fire and rehire altogether.

However, we might expect it to become a thing of the past soon, bringing employer flexibility to make changes to employees’ terms and conditions.

For the time being, however, employers should prepare to comply with the ACAS code when considering making changes to employees’ terms and conditions to ensure that employees are treated fairly and avoid the risk of costly tribunal claims. Contact us for further guidance on firing and rehiring rules.