You may recall that over the past year we have referred to Fire and Rehire strategies on a number of occasions.
These have been used by some organisations during lockdown to help organisations ‘renegotiate’ their employment contracts, supposedly to help them survive. They have been called into question by unions, politicians and members of the HR community.
ACAS wrote a very critical report on the subject during the summer. And they promised to the Government that they would produce guidance to employers, laying out the best way to negotiate changing contracts.
It has been something that we have never advocated either. Essentially, it is a unilateral breaking of the original employment contract, softened by the promise of new employment, albeit generally on less favourable terms.
Not only does it seem to us to be unfair to the employees and damages working relations, it also potentially lays the organisation open to legal challenge and bad publicity.
We recognise that there are times when contracts do need to be renegotiated or altered. The pandemic and the furlough scheme meant that many employers had to quickly sort out a plan to allow short time working and layoff to be incorporated into employees’ contracts. We are pleased to comment that nearly all of our clients did not have that hassle, as the appropriate lay off the short time working policies were already in place.
But the blunderbuss approach of firing everyone and then re-engaging is a sledgehammer to crack what is very often a much smaller problem. And many who have approached their staff problems in this way are finding it difficult to win back the trust of employees now there is a genuine labour shortage. Long term the approach may very well prove to be more expensive than the savings.
ACAS certainly seems to think so, and last week followed up their report by publishing new advice. This is aimed at helping employers maintain good employment relations and reach agreement with staff if they are thinking about making changes to their contracts.
In particular, the guidance covers
- When to considering employment contract changes
- How to propose them
- Consulting about the changes
- Handling requests for changes to an employment contract
- How to proceed if employment contract changes are agreed
- What to do if they cannot be agreed
ACAS Chief Executive, Susan Clews, said:
“Our new advice is clear that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations.
Employers should thoroughly explore all other options first and make every effort to reach agreement with staff on any contract changes.
Organisations that consult with their workforce in a genuine and meaningful way about proposed changes can help prevent conflict at work and stay within the law.”
ACAS’ full advice is available here.
We would see fire and rehire as the nuclear option, only to be considered when extensive negotiation has failed and/or when impending insolvency/liquidation means that there is genuinely no alternative, other than to cease to exist after energetic attempts have been made to make ‘life-saving’ changes by agreement.
It must also be re-iterated that doing so is likely to mean that key staff will leave, recruiting suitable replacements may be very difficult, and morale will for a time be low.
The guidance provided in this article is just that – guidance. Before taking any action, make sure that you know what you are doing, or call an expert for specific advice.