‘Fire and rehire’: is it legal?
The Government’s furlough scheme is due to end in September 2021, and employers and employees alike will be thinking about what that means for them.
Whilst employers will be concentrating on how to keep their business profitable, or even how to keep it going now that so much has changed, employees who have been on furlough will be anxious about whether they will be returning to work or let go.
The term ‘fire and rehire’ has been used in various recent news stories about organisations who are trying to change their employees’ contracts and terms of employment. However, although a relatively new term, added to the pandemic dictionary alongside ‘furlough’ and ‘social distancing’, it’s not a new tactic.
What is fire and rehire?
Also known as ‘dismissal and re-engagement’, ‘fire and rehire’ is where employers fire workers and rehire them under different terms of employment, which are more favourable to the employer. For example, altered salaries or different benefits.
Trade Union bosses recently criticised Sainsbury’s owned Argos’ use of ‘fire and rehire’ tactics as a reported 700 staff have been given the choice of accepting cuts to pay, benefits, pension contributions and conditions, or losing their jobs.
Why are employers changing their employees’ terms?
As we all know by now, the coronavirus pandemic has resulted in many businesses seeing a dramatic fall in their income. The furlough scheme allowed employers to save money on salaries by essentially letting employees go temporarily, with the government paying up to 80% of their salary. Many companies and organisations have also had to make redundancies where furlough was not a viable option.
Although some sense of normality is within reach, recovery from the pandemic will take time, and employers face tough decisions as the safety net of furlough nears an end. Those who are looking to retain as many employees as possible may subsequently look to reduce their employees’ terms of employment, either temporarily or permanently.
Is fire and rehire legal?
Terminating an employee’s employment and then rehiring them under different terms is not strictly unlawful, as long as it is done properly, i.e. with legal contracts reviewed and signed.
However, employers are likely to face employment tribunal claims from unhappy employees who face significant changes to their pay, benefits or hours, and subsequently, their lifestyle.
ACAS has issued guidance on employment contract changes and what employees can do if these changes are not agreed.
The guidance recommends that employers should consider whether the changes are really necessary and, if they are, to take the following steps:
- Attempt to reach an agreement with their worker – this may take time and employers should make that time to do so.
- Consider the damage to workplace morale, and the risk of legal proceedings against them.
- Follow fair dismissal procedures and give the lawful amount of notice to employees.
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If you’re an employer who is considering taking the approach of amending employees’ terms of employment and you want to ensure you are doing so properly, with the legal aspects taken care of, our employment solicitors can help.
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