What is Fire and Rehire?

What is Fire and Rehire?

Fire and rehire is a tactic used by employers so that they may rehire fired employees under a different contract with less favorable terms than their previous contract held. This tactic is legal, though unfair as it exploits workers.

Employers may want to renegotiate their employees’ pay or holiday allowances, for example, and this process is commonly used by companies when they are suffering financially and need to cut costs in order to keep their business afloat.

This tactic is highly controversial, as many people feel that it is used more as a threat rather than as a last resort after attempts to consult with employees in order to renegotiate have already been made but were unsuccessful.

During the pandemic, this tactic became more commonly used by employers as businesses struggled to cope with loss of profits and rising employment costs in such desperate times. Fire and rehire has gained much media attention recently following Covid and the mass-sacking at P&O in March 2022. As a result, there have been calls for reform of this practice to try make the process fairer for employees.

This method is not only being used by large corporations; since the pandemic, it has also become more common amongst small businesses. A survey conducted by the Trades Union Congress in November 2021 found that 9% of workers were asked by their employer to reapply for their jobs on less favourable terms since March of the previous year.

The new Acas code

Following the recent events that have gained media attention and the rise of this tactic during the pandemic, a new statutory code of practice will be implemented by Acas. The government’s new statutory practice does not prohibit the act of firing and rehiring but does  contain new provisions that businesses should follow. The new Acas code states that employers must hold fair, transparent and meaningful consultations with their employees to discuss any proposed changes to employment terms.

The consultation should include practical steps employers can follow before enacting a process of firing to rehire. If a claim for unfair dismissal is heard by the Tribunal, then adherence to this code should be taken into account. Should an employer fail to follow the Acas code, then an uplift of up to 25% can be applied to the claimant’s compensation should their claim succeed.

What do the changes to the Acas code mean?

Despite calls to ban the fire and rehire tactic by both the Labour party and the Liberal Democrats, the government have no plans to make it illegal any time soon.

Though additional guidance has been provided this year, in 2021 Acas provided initial guidance on firing and rehiring with tips on how employers should negotiate new terms with their employees. As a result, there is an argument to suggest that the additional guidelines will not make a significant impact to the way in which firingand rehiring is dealt with, as there are no real restrictions that employers must legally abide by.

 It should also be noted that employees can only usually claim unfair dismissal against an employer if they have worked for them continuously for two years. Therefore, long-term serving employees should not be treated the same as new employees as that would breach their employment rights and may result in legal action.

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