New ACAS guidance on "fire and re-hire" practice

MortonFraser_Nicole Moscardini
Nicole Moscardini
Senior Solicitor
16 November 2021

Guidance confirms it should be used "as a last resort"

When the UK Government confirmed they had no intention to ban "fire and re-hire" practices earlier this year it asked ACAS to produce clearer, more comprehensive advice for businesses on when and how this practice should be employed.

ACAS have now published new guidance for employers on their responsibilities when making changes to employment contracts.  This includes a section on "dismissing and rehiring". The advice highlights that, before taking this step, employers must have made all reasonable attempts to reach agreement through full and thorough consultation.

The practice has received a lot of negative press in the past 12 months with a TUC poll published in January suggesting it had become widespread during the pandemic. A dispute between British Gas and its workers over the use of the practice received a lot of coverage in Spring 2021, with a number of other employers also receiving media coverage.  It is not though a new practice having been used for many years as a way of changing terms and conditions of employment when agreement could not be reached. 

The guidance clearly sets out the risks for employers should they terminate and offer re-engagement including (1) damage to employee relations and trust, (2) losing staff the organisation would prefer to keep because they do not accept the new offer, (3) reputational damage and (4) legal claims including unfair and constructive dismissal and the potential for protective awards of up to 90 days full pay per affected employee if there is a failure to collectively consult.  For unionised workplaces, there is also the threat of industrial action.

Given these risks, dismissal and re-engagement is not something that should be undertaken lightly and it is recommended that employers seek advice prior to taking action. It does though remain a legitimate approach for employers to take in certain circumstances.


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