Using Fire and Re-Hire to Change Conditions
While it is possible to fire and re-hire employees on new terms and conditions – the question employers should really ask is whether this is ever really needed? Can the outcome you are looking for be achieved in a way which will prevent feelings of resentment from employees and help them understand the need for changes.
On a routine basis, and especially during the pandemic, organisations will take time to assess business needs, and occasionally there is a need to change employee’s terms and conditions – sometimes to decrease pay or benefits for employees. Rightly this became a huge topic of public debate during the pandemic and as a result ACAS published new guidance around this practice. The government felt there are times when this can be legitimately used so chose not to outright ban the practice but put in more guidance around when it should be used.
There will always be more benefits to reaching an agreement versus a routinely negative outcome for all sides if no agreement can be reached.
Beware of Rushing In
Imposing less favourable conditions on employees and firing with the purpose of re-hiring is always going to cause bad feelings amongst employees and morale within the team in general. After the new terms are in place the employer faces a uphill struggle to win back the support of employees and the goodwill needed to support a thriving business.
If a trade union is recognised there is a good chance of industrial action. Reputational damage to the company can also affect businesses negatively and this can outweigh the cost savings the business is trying to achieve. New customers or new employees can be put off by the image of companies treating employees unfairly.
In today’s climate of low unemployment and record high vacancies it is worth considering if it is really worth the risks?
First Step – Try Alternatives
The decision to dismiss and re-engage should always be as a last resort and only when necessary for the business to survive. Employees should be consulted on any changes with the view to finding a mutually agreed set of terms in the first instance. Meaningful dialogue at this stage is important and letting employees know the full reasons why the changes are necessary, can help them to engage with alternative ideas and buy in to the necessity for the change.
While employees are naturally unlikely to give up ways of working for less favourable terms and conditions – they are likely to engage with the business to keep their job and be more receptive to enhancing another benefit – losing higher sick pay but gaining more holidays for example. Introducing a birthday holiday for slightly longer working weeks. Or a pay decrease for working a shorter week with Friday afternoons off. Employers have options and some come with a relatively low cost – it is about balancing the needs of the employer with the employee.
Employers can consider introducing any changes gradually over a temporary period to go through rough patches in sales or funding with a promise to move back to previous ways if things pick up again.
After Exhausting Other Options
It is a risk to fire and re-hire on new terms and conditions, not least is the risk of possible legal claims and employers need to be absolutely convinced the changes are needed as it may end in employment tribunals with hefty legal fees.
If changes cannot be agreed, then employers can give notice that the changes will be coming (imposing changes on employees). If the changes are being forced through risks include employees working under protest –potentially this can lead to claims of unlawful deductions of wages if pay is involved or claims of breach of contract.
If employers dismiss and offer to re-hire, they will need to have a strong ‘some other substantial reason’ to dismiss as this can be challenged at an employment tribunal. Employees must be given the chance to appeal against their dismissal. Also, employees do not need to sign the new contract and can decide to leave the business altogether.
Employers really must question if it worth the risk and at what cost?