Fire and rehire has been a hot-button issue in recent years. Why?
Because it blurs the line between restructuring and exploitation. Businesses have used this tactic to push through changes to terms and conditions—like slashing wages or removing benefits—under the guise of “restructuring.”
But here’s the kicker: a recent report from ACAS (Advisory, Conciliation, and Arbitration Service) found that nearly one in ten UK businesses have used fire and rehire. And it’s not just small companies; big names like British Gas have faced massive public backlash over it.
So, what’s the government’s take on all of this? Well, things are shifting, and further restrictions are expected, to the point of possibly making most fire and rehire practices automatically unfair.
While the future is uncertain still, the grey area of what’s legal and what’s not has gotten clearer.
That’s why you, as an employer, should read this article to understand where the law stands now and how upcoming legislative changes could affect your business. Let’s get into it!
What is Fire and Rehire?
Fire and rehire—also called dismissal and re-engagement—is a practice that occurs when an employer dismisses an employee but offers to rehire them under new terms.
Usually, less favourable ones.
In practice, this often happens when employees refuse to accept changes to their contracts.
What Is An Example Of A Fire and Rehire?
If you’re in maritime operations or have operational ties to the Bahamas, P&O Ferries is a name that probably rings a bell.
In 2022, this UK-based shipping giant pulled off one of the most dramatic fire-and-rehire moves ever. 800 employees were dismissed in a single swoop before the company tried to rehire them on worse contracts—all to cut costs and restructure.
The backlash was global and brutal. The lesson for companies?
Clear: Think twice before making unilateral employment contract changes and consult an employment law attorney before you attempt to fire and rehire.
Is Fire and Rehire Legal Now?
Short answer? Yes—but it’s not as simple as it used to be.
In fact, it’s wrapped up in so much red tape you’ll want to think twice before going down that route.
Namely, the recent legislation completely changed the game, making fire and rehire considered as unfair dismissal in most cases. The only exceptions?
Your business is in serious financial difficulty.
The changes are absolutely necessary to keep the company afloat.
And, you’ve got no other options on the table.
If you get it wrong, employment tribunals can add up to 25% more compensation for unfair dismissal.
Even worse, if you skip the required meaningful consultation process (we’ll talk about this more later), you could face serious legal penalties.
So yeah, it’s best to make it your last resort.
How to Approach Fire and Rehire When No Other Options Are Available
So, we’ve established that the practice of fire and rehire should be considered a last resort for companies.
Now, let’s see what those facing significant financial pressures, such as supply chain issues, rising costs, or revenue loss, can do to stay afloat:
Secure Employee Agreement
Ideally, before attempting fire and rehire, employers should aim to secure agreement to any contractual changes through meaningful consultation with employees.
During the consultation process, the employer must share all necessary information about the proposed changes. This includes the business reasons, who will be affected, the expected timing, and any other options considered.
The employer must also provide written notice of any changes to contractual terms within one month of the new terms taking effect.
This process should allow employees to make counter-proposals.
Note: Employers must not make direct offers to employees if a trade union exists unless collective bargaining has been exhausted.
Employers can then formalize these agreements through:
A new contract of employment
A side letter to the existing contract, signed by the employee
Collective agreements, where permitted, through trade unions
Clear so far? Let’s move on then.
Review Flexibility Clauses in Existing Contracts
Before considering fire and rehire, employers should first review any flexibility clauses in existing contracts. These clauses may allow for minor adjustments without employee consent (e.g., task reassignment or slight changes in working hours).
However, significant changes—such as pay cuts or major shifts in working hours—cannot be enforced unilaterally without employee consent.
Approach Unilateral Variation of Contract With Care
In cases where an employee refuses to accept the changes, the employer may choose to impose them as a unilateral variation of contract, rather than resorting to fire and rehire.
This approach is risky, as it can lead to legal challenges.
If an employee continues working under the new contractual terms without objecting, after a certain period (usually months), they may be deemed to have accepted the changes. However, the specifics depend on the facts of each case.
For the sake of precaution, employers should not assume implied acceptance simply because an employee does not object, especially when the changes affect pay or other long-term entitlements (such as sick pay, maternity pay, or redundancy entitlements).
UK Supreme Court’s Stance on Tesco Fire and Rehire Case
In September 2024, the UK Supreme Court put a major halt on the controversial “fire and rehire” practice, especially when it comes to cutting employee pay.
In the famous Tesco fire and rehire case, the Supreme Court made it clear that employers cannot use fire and rehire to strip employees of benefits they were promised—no matter how much they want to.
Specifically, they shut down Tesco’s attempt to unilaterally ditch employees’ “Retained Pay,” a pay boost for workers who had relocated for the job.
However, the Court also said Tesco could still fire employees if it was for:
Misconduct
Redundancy
Lack of capability
Basically, this case marks a significant restriction on employers’ ability to unilaterally alter employment terms, including reducing wages, through the practice of fire and rehire.
Conclusion
The recent legislative fire and rehire developments serve as a cautionary tale for all businesses:
If you’re making changes to contracts, especially when it comes to key terms (in this case, those regarding pay and benefits), you need to be careful.
Mess up, and you could end up dealing with legal claims and hefty disputes.
Whether you’re dealing with contractual changes, wrongful dismissal claims, or labor disputes, contacting an experienced employment law attorney from ParrisWhittaker is the way to go.
We specialize in helping foreign companies stay on the right side of local laws, avoid costly mistakes, and handle any disputes that come their way. Contact ParrisWhittaker today and make sure your business stays compliant and protected.
