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  • Writer's pictureSusan Wakelin

Can employers "fire and rehire" employees?

Updated: May 25, 2023

UK law does not generally allow employers to unilaterally change employees' terms and conditions of employment. However, there are exceptions to this rule under certain circumstances.

Employers may, occasionally, need to consider structural changes, often due to financial problems or a change in customer needs. Situations such as this may mean that employers have no choice but to review employees terms and conditions of employment.

Changing employees terms and conditions of employment, is not a decision which should be taken lightly, and there should be good business reasons for this.

Where possible, employers should obtain agreement from their employees before changing their terms and conditions of employment and, where they do not have agreement, employers often resort to a practice of dismissal and re-engagement..

Dismissal and re-engagement, is often called "fire and rehire", which is where an employer changes terms and conditions of employment unilaterally by bringing one contract to an end and offering a new contract of employment to start immediately after the termination of the first one.

In these circumstances, employees usually have only three choices:

  • accept the changes;

  • refuse to accept the changes and continue working; or

  • leave their job.

What proposed legal changes are there to protect employees from "fire and rehire"?

"The Government has been clear that threats of dismissal and re-engagement should not be used as a negotiation tactic." – Grant Shapps, Business Secretary

The Department of Business, Energy and Industrial Strategy (BEIS) has commenced consultation in relation to a draft statutory Code of Practice on employers' responsibilities when changing terms and conditions of employment, allowing interested parties time to provide feedback. The consultation period closes on 18 April 2023, when all feedback will be reviewed before the Government publishes a response and the final version of the Code of Practice.

The draft Code of Practice lays out a requirement for employers to consult with employees when they are looking to change terms and conditions of employment, during which time they are required to discuss and consider alternative options without the threat of dismissal pressurising employees into an agreement.

Can employers currently change their employees terms and conditions of employment?

Where employers have a genuine business reason to review employees terms and conditions of employment, they may consider reducing pay and/or the cost of benefits, as well as changing employees duties in line with the needs of the business.

Employers should never take the decision to make changes lightly, and should carefully consider alternatives to changing terms and conditions of employment first. Where they decide they have no choice and cannot avoid changing terms and conditions of employment, employers should consulted and, where possible, obtain agreement with employees to the changes.

Where employees do not agree to the changes, an employer may have no choice but to consider dismissing and rehiring their employees. When consulting, employers should inform employees of the reasons for the change and the proposed date of implementation, leaving plenty of time for notice. Employers should also be clear about the effects of the change on employees and consider any feedback and suggestions made in relation to reducing or avoiding negative change. Some employers may also consider incentives to encourage employees to accept negative change. Where changes to the terms and conditions are for financial reasons, the alternative to accepting changes may be redundancy. When this is the case employers should explain this to employees during the consultation period.

Varying employees' terms and conditions of employment unilaterally is always risky. Employees may remain in employment, but make it clear that they do not accept the changes. Employees may then make a claim to the Tribunals Service whilst still in employment for breach of contract or unfair dismissal. Those that choose to leave the organisation may claim to the Tribunals Service for constructive unfair dismissal.

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SWan HR provides a broad range of tailored HR services including an HR audit, HR advice, HR outsourcing, HR coaching and project work for all businesses.

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