With flexible furlough set to finish at the end of September, there is a real risk that if the government doesn’t release additional funding to businesses, then ‘fire and rehire’ is likely to become more widespread. Companies may struggle to afford to keep staff on either their current hours, pay or benefit packages.

We’ve already seen publicity growing around this topic. A TUC poll found that since the first national lockdown in March 2020, nearly one in ten (9 per cent) workers have been told to reapply for their jobs on worse terms and conditions, or else they’d be let go.

Almost 500 British Gas engineers recently lost their jobs after they refused to sign new contracts meaning more hours for less pay. Others, such as British Airways, have also been condemned by workers unions for ordering staff to accept what the unions said were inferior contracts.

With furlough funding set to be withdrawn, keeping staff employed on their current terms may no longer be viable, and a reduction in employees’ hours or pay could be the only way to survive post-pandemic. Given staff can account for as much as 70 per cent of total business expenses, it’s hardly surprising it tends to be the first option organisations consider when looking to reduce outgoings.

But with three-quarters of the UK public against this approach, unions calling for a ban, and a number of associated legal risks, businesses considering this strategy should proceed with caution.

Dismissal and reengagement should always be a last resort

Firstly, it’s important to understand the four ways an employer can change a contract:

  1. In accordance with the terms;
  2. By obtaining the employee’s agreement;
  3. Unilateral variation; and
  4. Dismissal and reengagement (aka ‘fire and rehire’).

If you’ve exhausted options 1-3, you’re left with the prospect of dismissing employees on notice and reengaging them on new terms. This is usually preferable to unilateral variation as it is easier to defend, though it’s still a risky road to take.

The main issue with fire and rehire is that it involves a dismissal, which opens the door to unfair dismissal claims. However, if you’ve first attempted to bring the change about via negotiation and have a solid business case for making the change, you may well have a decent defence.

Time is a big problem. Employees must be dismissed on notice and this could be as much as 12 weeks depending on length of service or contractual terms. Furthermore, if the changes involve 20 or more dismissals, collective consultation requirements will be triggered, making the process even longer. As the pandemic has proven to many employers, time is unlikely to be on your side.

Tips to strengthen your position when firing and rehiring

1. It’s not for a Tribunal to tell you how to run your business or judge commercial decisions, but it will help your case enormously if you can provide your latest financial reports and evidence the shortfall being faced. Additionally, be prepared to show the other money-saving measures you put in place first before firing and rehiring.

2. If dismissal and reengagement is not a last resort, it’s unlikely you will be able to defend a claim. It’s all about an employer acting ‘reasonably’, and while there’s less room for negotiation at the moment, a Tribunal would expect you to have explored other avenues and at least attempt to seek agreement first.

3. Don’t forget to document your processes. In most cases, the employees who are subject to dismissal and reengagement would be invited to a meeting to discuss the issue and offered the chance to appeal. That is in addition to whatever collective consultation may have taken place (if necessary).

An option that’s here to stay

Despite recent media coverage and vocal campaigning against fire and rehire, it’s by no means a new phenomenon. Employers have been using dismissal and reengagement for decades and it is a potentially fair reason for dismissal. In reality, this sort of thing happens all the time, but recent cases affecting key workers who have been working to help people throughout the pandemic have been thrust into the public spotlight.

Despite renewed attention around these tactics, the likelihood of this option becoming more common as the end of the furlough scheme draws closer, and polling suggesting that the public supports a legal ban on the practice, the headlines are unlikely to result in a change.

It’s highly unlikely the government will remove fire and rehire because in some cases the employer literally doesn’t have any other choice and will have to use this as a last resort.

Protections for employees already exist – they can bring a claim for unfair dismissal, and it’s up to a Tribunal to decide whether or not what the employer did was within the range of reasonable responses, whether they followed the correct procedure, and to dig down into the rationale.

Ultimately, if no further funding is made available beyond September, some organisations may need to make cutbacks and will be forced into this approach whether it’s popular or not.