With the end of the furlough scheme approaching (on 30th September 2021) many organisations may find themselves in a position where their existing employment terms and conditions are no longer viable.
A decades-old practice, receiving much publicity recently, is ‘Dismissal and Re-engagement’, more commonly known as ‘Fire and Rehire’; so much so that the Department for Business, Energy and Industrial Strategy (BEIS) asked ACAS, in October 2020, to carry out an impartial and independent fact-finding exercise. The results of which were published on 8th June 2021.
This practice occurs when an employer wishes to negotiate new terms of employment (e.g.: reduced pay, altered working hours, a location change, etc.), but the employee does not agree. Rather than make the employee redundant (where that’s applicable) and/or to avoid a long-drawn-out dispute, the employer dismisses them and offers to re-engage them under new employment terms. The practice is seen as less time-consuming, less costly and less complex than alternative processes.
The practice is lawful, but as you can imagine, controversial, particularly as it appears, to some, that it is being used more frequently as a ‘tactic at an early stage of negotiation processes’, whilst others have suggested its increase in use is linked to the urgent business challenges experienced during the COVID-19 pandemic. Whatever the motivation, it carries a high risk of damaging the organisation’s reputation.
According to research carried out by the TUC, one in 10 workers have been forced to reapply for their own jobs, typically with less favourable terms, during Covid (whether as part of a ‘Fire and Rehire’ or some other process). Furthermore, in the research carried out by ACAS, some participants felt that the global crisis had provided a ‘smokescreen’ opportunity for employers to diminish their employee’s terms and conditions.
We continue this month’s blog by looking at the rationale behind using the Fire-and-Rehire practice and the inherent risks involved, while paying particular attention to the effects it can have on employer-employee relationships and company reputations.
The unprecedented challenges brought by the pandemic, coupled with the upcoming withdrawal of furlough support, means many employers have been, or soon will be, left with little choice but to consider redundancies and/or renegotiate their Employment Contracts, some in a bid to survive.
Employee costs account for up to 70% of an organisation’s outgoings, so for saving money, the workforce is often one of the first areas to focus on.
Firing-and-rehiring should be identified as a last resort, where all other forms of negotiation have failed, and it should be clear that there is no other way of preserving the organisation before going down this route. These reasons need to be fully and clearly explained to employees who may be affected, as part of a consultation process, so that they can understand the employer’s position and hopefully be more accepting of the decision. They may also be able to offer alternative solutions not previously considered.
Although the fire-and-rehire practice is lawful, it is not without risk.
If an employer terminates an employee’s Contract, with a view to offering them a new Contract with fewer benefits or lower pay, they could leave themselves open to Tribunal claims if the employee has more than two years of service. As a result, many individuals selected for the fire-and-rehire scheme have less than two years’ service. (Note: Employees with less than two years’ service may still bring Tribunal claims however, if their dismissal was potentially down to reasons such as discrimination, for example).
If the approach is to be used, proper contractual notice should be given and all related processes and procedures followed to the letter. Failure to do so can result in the employer being served with Tribunal claims for unfair dismissal (and potentially other claims too).
Considering the current climate, many employees subjected to a fire-and-rehire practice feel they have no choice but to accept new Contracts being forced upon them in this way, regardless of terms, when the alternative is unemployment. Right away, employers are presented with an issue that can destroy employer-employee relationships.
The use of this approach by high profile organisations such as British Airways and British Gas has shown how badly relationships between employees and their employers can break down, when individuals feel bullied into taking a bad deal or face being left out in the cold.
Firing-and-rehiring may serve some organisations financially, while keeping an experienced workforce on board, but that workforce is likely to be made up of very disgruntled employees, whose respect in the organisation has been lost, and are working begrudgingly. Personally, we’re not sure the thought of leading a workforce in that mindset would feel especially comforting!
Long before the pandemic, there had been a big consumer shift towards supporting organisations with good morals and ethics, and away from those that appear to prioritise ‘fat cat bonuses for the few’ and profit over people.
While some organisations have been described as unscrupulous in taking such action, many employers are taking this drastic step in a desperate bid to survive post-pandemic.
Still, the fire-and-rehire approach is a very hard sell to most people, whatever the circumstances (a survey for the GMB union found that 76% of the UK public want the scheme banned), and few look at it as truly being in the best interests of the employee, seeing it as solely for the employer’s benefit.
As a result, using this approach, even in an attempt to protect employees’ interests over the long term, can be significantly damaging to an organisation’s public and workforce reputation.
While useful in an operational sense, firing-and-rehiring carries significant risk; will invariably have long term consequences for employer-employee relationships, especially if handled insensitively; and the organisation’s public reputation faces taking a serious hit.
Before considering firing-and-rehiring, look for alternative ways of saving money, such as recruitment freezes, a ban on overtime or voluntary redundancies, for example. Beyond that, move to full transparency with employees. Explain why such changes to Contracts are needed, providing proof that there is no reasonable alternative. Employees are more likely to be in agreement to changes, particularly where the alternative could be widespread job losses or the collapse of the organisation altogether.
As furlough ends, we are likely to see a rise in organisations employing firing-and-rehiring tactics though, as it can offer a way of forcing new Contracts on employees where negotiations would likely fail. However, forcing anything on anyone will always be considered controversial.
If you need further advice on this topic, please do not hesitate to contact us.