Where an employer needs to make contractual changes to an employee’s terms and conditions this should always be approached through consultation and agreement with the employee(s) involved.
In exceptional circumstances, where there are genuine and pressing business needs and agreement cannot be reached, employers can sometimes be justified in unilaterally changing workers’ terms and conditions by terminating their contracts and re-hiring them on new terms and conditions.
The CIPD’s view is that such “fire and rehire” practices should only ever be considered as an absolute last resort if changes to employment contracts are critical and voluntary agreement is not possible.
“Fire and rehire” – also known as “dismissal and re-engagement” is not a new practice. It is legally allowed in the UK, but does carry serious risk of costly claims and wider commercial repercussions if not managed or implemented correctly.
Following questionable practice by some employers, the UK Government underwent a 'fire and rehire' consultation, resulting in the Draft Code of Dismissal and Re-engagement in January 2023. The draft code is not legally binding, but it is admissible in certain Tribunal claims. A formal version of the code is expected in Spring 2024.
Within the draft guidance, emphasis is placed on employers’ providing as much notice as possible of proposed changes. Employers are asked to undertake consultations in ‘good faith’ and with an ‘open mind’. Emphasis is placed on the employers’ obligation not to use a threat of dismissal to pressure employees to accept new terms. The draft guidance calls for consultations to be seen as an ongoing process, where employees' inputs are considered. Indeed, the consultation 'should continue for as long as possible’. Under the draft code tribunals can increase the award to the claimant or defendant by 25%, if a party is seen as in breach of the code.
Employers must recognise that 'fire and rehire'creates a high risk of legal claims, reputational damage and an adverse effect on employee relations. It should only be undertaken after extensive consultation and consideration of all other alternatives.
In this guide, we look at the laws around “firing and rehiring” and, more importantly, ways to find a different solution.
Varying the terms and conditions of employment
Good practice dos and don’ts – changing terms and conditions
“Fire and rehire”
Importance of considerate and empathetic management
Case study example
Please note: While every care has been taken in compiling this content, CIPD cannot be held responsible for any errors or omissions. These notes are not intended to be a substitute for specific legal advice.
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