Changing terms and conditions of employment: Acas provides new guidance

This year we've seen an increase in the numbers of companies who have dismissed staff and offered to immediately re-engage them on less generous terms and conditions - a practice that's now commonly referred to as 'fire and re-hire'. It's a risky strategy and employers usually only adopt it if their attempts to persuade staff to agree to the changes have failed.

It's controversial because it presents workers with a stark choice - accept worse terms and conditions which you said "no" to before, or lose your job. 

In October, Labour MP Barry Gardiner issued a Private Members Bill to amend the law relating to workplace information and consultation and to provide safeguards for workers against dismissal and re-engagement on inferior terms and conditions. The government agreed that "using threats of firing and rehiring is completely unacceptable as a negotiating tactic" but opposed the bill (which failed) because it didn't think legislation was the answer. Instead, it asked Acas "to produce a more comprehensive and clear guidance to help employers explore all of the options before considering 'fire and re-hire".

Acas has now published new guidance to help employers maintain good employment relations and reach agreement with staff if they are thinking about making changes to their contracts.

It covers the following issues:

• Considering employment contract changes
• Proposing employment contract changes
• Consulting about employment contract changes
• Handling requests to change an employment contract
• If employment contract changes are agreed
• If employment contract changes cannot be agreed

Need help?

If you are thinking of changing the terms and conditions of some or all of your staff, you must tread carefully. It's always better to try and agree changes rather than impose them and deal with the fall-out.

 If you recognise a union, you'll need to consult with them. And, even if you don't recognise a union, you may have to undergo collective consultation if you envisage that 20 or more members of staff won't agree to the changes (which can be hard to judge from the outset). This is because the definition of redundancy for the purposes of collective consultation covers any dismissal for reasons that are unrelated to the individual. If an employer requires the same number of staff but dismisses and re-engages them on new terms, the employees will have been dismissed for reasons unconnected with them as individuals. 

Penalties for getting this wrong are high. If you fail to collectively consult with staff, each employee can receive a protective award of up to 13 weeks gross pay. 

They could also claim unfair dismissal.

Our legal experts can can guide you through this process and minimise risks to your business. Please get in touch with us for more information.

Acas Chief Executive, Susan Clews, said:

"Our new advice is clear that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations.

"Employers should thoroughly explore all other options first and make every effort to reach agreement with staff on any contract changes.

"Organisations that consult with their workforce in a genuine and meaningful way about proposed changes can help prevent conflict at work and stay within the law."”