Fire and Re-hire

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What does Fire and Re-hire mean?

Fire and Rehire is a practice where the employer wants to employ the employee on less favourable terms and conditions and effectively, the employer gives contractual notice of termination of their existing contract terms and then re-hires them on less favourable terms and conditions with the employee maintaining continuity of employment.

Is Firing and Re-hiring lawful?

Yes and when an employer is going to carry out a “fire and re-hire” it is recommended that they adhere to an ACAS “fire and re-hire” code of practice. Whilst an ACAS code of practice is not statutory, it is seen as good practice and should the “fire and re-hire” ever be subject to legal proceedings, a Tribunal would factor in if the employer followed the ACAS code.

Is it a recent development?

The principle of terminating an employee’s contract after giving contractual notice and then re-employing them on new and less favourable terms and conditions is not new but the expression “fire and re-hire” has become widely recognised and as it was becoming quite common practice, ACAS introduced their code.

Why would an employer Fire and Re-hire?

An employer would carry out a “fire and re-hire” where they want to implement new working practices or shift patterns, reduce pay and remuneration arrangements or perhaps reduce sickness benefits or holiday entitlement. Invariably, these changes would be made because the employer wants to save money or the current level of cost is becoming unsustainable and, in some cases threatening the long term viability of the business.

Is it a risky strategy?

It is certainly not without risk and widely condemned by Trade Unions. The greatest risk is that when the period of contractual notice expires and the employee is then re-engaged on less favourable terms that the employee chooses not to accept the new contract and resigns and claims constructive dismissal.

It is widely acknowledged that it is high risk for an employee to bring a constructive dismissal claim and if the employer wants to be in a position to successfully defend their actions, they will need to show that they consulted with the employee(s), followed a fair process, adhering to the ACAS code and acted reasonably.

What is the purpose of consultation?

If the employer intends to change or vary terms and conditions especially in a situation where the newer terms will be less favourable, the employer must consult with the employee(s) and listen to any representation or alternative ways of achieving the same end result and consider how the employee(s) will be impacted by the changes.

“Fire and re-hire” should be seen as a last resort, only used in situations where all other alternatives have been exhausted. After exhausting consultation and discussion, the employer will then choose to issue (or serve) contractual notice to the employee(s) which means that effectively at the expiry of their notice, they cease to be employed under their existing terms and conditions and are re-engaged on the new terms but the employee still retains continuity of service.

If the employee chooses not to transfer to the new terms, their employment has effectively terminated and, if at that point the employee decides not to transfer to the new terms, they are likely to bring a constructive dismissal claim.

What might give rise to a “fire and re-hire”?

The most common examples are where the employer might want to

  • Implement a new shift system, working pattern, maybe introduce weekend working or change pay structures with the result that the employee may be financially worse off or their earnings potential is reduced which results in a financial saving to the business
  • Employ the employee on reduced terms and conditions, most commonly holidays and sick pay.

It is not uncommon for a business to have very generous sick pay terms – perhaps 6 months full pay and 6 months half pay, and due to sickness absence levels, this is a significant cost to the business and they want to make the sick pay terms less generous. Some Companies only ever give Statutory Sick Pay.

Similarly, an employee may be entitled to generous holiday entitlement which might be 30 days plus various service increments plus bank holidays and the employer wants to reduce holiday entitlement.

But, it doesn’t have to be related to holidays or sick pay – it may be related to maternity pay or redundancy terms and again, the employer is only required to meet the statutory obligations.

Is “fire and re-hire” controversial?

Most definitely and there have been examples in recent years of big Companies, household names who have adopted this practice and there is no question, it can attract some every adverse publicity and lead to reputational damage even hitting share price.

In addition to the inevitable reputational damage, it can also have a negative impact on morale and employee relations because it can result in mistrust.

Also, depending on the nature of the business, if your benefits package is merely based on statutory provision, this is likely to have a detrimental impact on your ability to retain and attract talent.

Adrian Berwick offers HR support to SMEs and GP Surgeries and if you want any advice or guidance on the issues raised in this article, please either contact me on 07885 714771 or adrian@abhrsolutions.co.uk

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