‘Fire and Rehire’ – New ACAS guidance for Employers

Posted on: January 6th, 2022

Firing staff and then offering re-engagement to them on less favourable terms is a topical issue.

It is a topic that is on the government’s radar as they have said that threatening staff with dismissal if they do not agree to contractual changes is “completely unacceptable as a negotiating tactic”. In light of this, the Government asked ACAS to produce guidance on ‘fire and rehire’ practices which has now been published.

The guidance does not change the law, however, it is designed to help employers understand the steps they should take to deal with contractual changes in the workplace to maintain good employment relations. 

The guidance stresses the importance of consulting with employees and exploring all other alternative options before resorting to ‘firing and re-hiring’. Whilst employees cannot bring direct legal claims for an employer’s failure to follow this ACAS guidance, they are likely to be able to use the guidance as an indicator as to whether the employer has dealt with the process fairly.

A link to the full guidance can be found here.

What is a fire and re-hire process?

Where employers want to change express or implied terms in employment contracts, they first need to check if the specific change is permitted by the contract. If it is not, then an employer should consult with members of staff and try to seek agreement to the change. 

Where the change is positive (e.g., a pay rise), consulting with staff and getting their consent to the change is normally straightforward.

However, the difficulties arise when members of staff refuse to accept the change (normally because it is detrimental). Whilst an employer should seek to try to reach an agreement with the employee, sometimes the parties inevitably reach a ‘stalemate’ and that is where the fire and rehire practice tends to be used. The practice involves dismissing staff who do not agree with the contractual change and then immediately afterwards seeking to re-engage them on the new terms which they previously refused.

The ‘fire and rehire’ method is seen as a ‘last resort’ action and should normally only be used where no other resolution can be found. By using this method there is always a risk that the employee decides not to re-engage on the new terms and seeks to bring a claim for unfair dismissal instead.

By following the ACAS guidance and taking legal advice, employers can protect their employment relations and minimise the risk of claims.

Summary of ACAS guidance

The ACAS guidance is lengthy but is separated out into the following key issues:

  1. Considering employment contract changes
  2. Proposing employment contract changes
  3. Consulting about employment contract changes
  4. Handling requests to change an employment contract
  5. If employment contract changes are agreed
  6. If employment contract changes cannot be agreed

Things to consider

If employers wish to make changes to terms and conditions of employment they should:

  • Follow the ACAS guidance.
  • Consult with staff about the changes and try to seek agreement. Employers may need to collectively consult where they recognise a union and/or if they envisage that 20 or more members of staff will not agree to the changes.
  • If changes are agreed, then ensure they are documented.
  • If changes cannot be agreed considering other options such as ‘fire and re-hire’ but as a last resort. Therefore, it would be sensible to consider if the change has to be made at that time or whether it could be made at a later date as a package of changes (e.g. around pay rise time).

Whilst the ACAS guidance does not change the law, it acts as a clear and helpful reminder of the legal position in this area and the best practice approach for implementing contractual changes.

Employers should be mindful of how and when they go about implementing contractual changes and ensure they consult properly and meaningfully, bearing in mind the number of employees affected and whether a trade union are recognised by the organisation.

Employers should act with caution and seek advice if they want to use a fire and rehire process as there are significant risks involved and the process is complex.

If you have any questions on this practice, or would like some employment advice in general, please do get in touch with our Employment team. We would be happy to help.