Hearth and rehire, also called dismissal and re-engagement, is a apply that’s been round within the enterprise world for a very long time.
It entails corporations dismissing an worker, after which instantly rehiring them. With the ‘new’ job, comes a brand new contract which can usually include much less beneficial phrases for the workers member in query.
Yulia Barnes, Founder and Managing Director of boutique industrial legislation agency, Barnes Legislation Associates spotlight a latest instance which made headlines was that of union Usdaw who gained a case in opposition to Tesco within the Supreme Courts. The case centred round three of round 50 distribution centre staff affected by ‘fire and rehire’ plans. Workers had been requested to simply accept a one-off lump sum as a substitute of the upper pay they’d been awarded a lot of years beforehand to relocate; in any other case they’d face being dismissed and rehired with out the elevated wage.
Usdaw argued the employees’ contracts said the pay improve was everlasting, main the judges to conclude Tesco ought to have set down an finish date for the deal had it meant the pay rise to be short-term, and shouldn’t be in a position to hearth and rehire every time it ‘suited [their] business purposes to do so’ (BBC).
A controversial technique
Naturally the broader public solely turns into conscious of fireside and rehire methods once they seem earlier than the courts or within the media, as within the case of Tesco’s distribution centre staff. However, given staff are nearly at all times rehired on a much less preferential foundation, the apply has been controversial for nearly so long as it’s been round.
And it’s extra frequent than maybe thought: one Trades Union Congress survey discovered 9% of staff had been instructed to re-apply for a similar jobs below worse phrases between March 2020 and January 2021 (though it should be famous this was within the midst of the Covid pandemic which severely impacted nearly each enterprise within the UK).
Whereas the variety of folks affected within the final couple of years could be a lot decrease, this spike in firing and rehiring introduced it to the eye of the general public – and of successive Governments who’ve launched measures to curb the technique.
What are the principles round firing and rehiring?
A code of apply was issued by the earlier Authorities in the summertime of 2024; while it doesn’t search to eradicate dismissal and re-engagement, it does set out the choice choices employers ought to think about, stating the technique needs to be a final resort. Failure to observe the code doesn’t robotically imply an employer will face motion however, ought to a workers member take the matter to a tribunal and win, their compensation might be raised by 25% if they will present non-compliance by their employer.
That is set to get replaced by the present Authorities’s Employment Rights Invoice, which can see hearth and rehire methods deemed as unfair dismissal except the employer can show that they had no different choice besides to suggest a contract variation, and the explanation behind it was to scale back or get rid of the impression of extreme monetary difficulties which had been affecting the probability of the enterprise with the ability to proceed working (UK Parliament).
Because it stands, there isn’t any particular definition of ‘financial difficulty’ set down within the Invoice – which is over midway by the Parliamentary approvals course of – however this will nicely have been made clearer by the point it formally comes into legislation, probably not earlier than autumn 2026.
What are the alternate options?
Clear communications with staff, a set interval of negotiation and a willingness to be open to strategies are obligatory when adjustments could should be made. With open and trustworthy communications comes an elevated probability that agreements might be made to the satisfaction of employers and staff alike.
In fact, there’ll at all times be conditions when hearth and rehire must be thought of. However to align with pointers, this could genuinely be a final resort. It’s probably that the technique will bitter relations between administration and workers, and there’s additionally a wider reputational concern to think about. Clients are extra aware than ever of the ethics of the companies they use, and knowledge can unfold far more shortly within the digital age – so communication can also be required with wider stakeholders to make sure the model’s popularity isn’t tarnished by firing and rehiring.
The easiest way to keep away from getting right into a state of affairs the place the technique could also be obligatory is to make sure that contracts embody versatile clauses. The power to differ employment advantages and annual go away, for instance, places corporations in a a lot stronger place ought to they discover themselves having monetary points which name for contractual adjustments. It additionally means there’s a degree of transparency and honesty from the outset, that workers could expertise adjustments if (and provided that) they’re obligatory with a purpose to maintain the enterprise afloat.
If the cautionary tales about massive companies who’ve been burned by their hearth and rehire practices educate us one factor, it’s the worth of getting strong but versatile contracts in place, and of conserving two-way communication going between leaders and staff all through any difficulties or turbulence being skilled. By getting ready for any eventuality from the outset with versatile clauses in contracts, companies can finest defend themselves from being compelled down the fireplace and rehire route sooner or later – and in flip, they will help their workers keep away from the ramifications of this controversial technique too.
