'Plan to Make Work Pay', but at what cost?

What would banning fire and rehire mean for employers, and what would the implications be?

"Fire and rehire is usually the last resort for an employer trying to reduce an employee’s salary and/or benefits (or other terms of their employment contract in circumstances when employees refuse to voluntarily agree to such changes). Common examples are where employers cannot afford to pay generous legacy benefits such as final salary pensions and generous sick or redundancy pay schemes.

"If fire and rehire is banned, then ultimately the only likely option will be to fire such employees and, depending upon the circumstances, there could be a substantial number of dismissals and employees being out of work.

"Banning fire and rehire will probably lead to an increase in people being out of work and employers having to pay expensive redundancy costs (which could be avoidable). This could ultimately lead to businesses failing."

What could strengthening TUPE protections look like? How would this affect employers?

"The main weakness of TUPE protections is that an employee without two years of continuous service can be dismissed after a transfer even if the transfer is the reason for the dismissal. Allowing unfair dismissal rights from day one (which Labour has said it plans to do) will significantly strengthen employees’ rights under TUPE. Under Labour’s plans, a dismissal caused by a transfer will be automatically unfair for all employees (with some limited exceptions)."

What would strengthening redundancy rights and protections look like, and what would the implications be for employers?

"Currently, employers are required to go through collective consultation if they intend to make 20 or more redundancies in the space of 90 days at one establishment. In the Woolworths case, it was clarified that each shop was considered to be one establishment.

"Collective consultation involves consulting staff in relation to the redundancy proposals either by electing employee representatives or consulting with a recognised union. Such consultation is for at least 30 days (or 45 days if there are 100 or more redundancies). It’s a significant and costly administrative burden that employers go to significant lengths to avoid. Employers are also required to notify the Secretary of State about the proposed redundancies.

"Going forward, Labour wants collective consultation to apply if 20 or more redundancies are being made in the space of 90 days across an entire business. This is a seismic change. If an employer fails to notify the Secretary of State, it commits a criminal offence. If an employer does not collectively consult with the relevant individuals, every affected employee is entitled to up to 90 days’ gross pay as a penalty (in addition to any other awards for any other potential employment tribunal claims). For large employers it is easy to see how this could be high risk. It’s perfectly possible to imagine a large company making 20 employees redundant in 90 days without management fully keeping track and inadvertently breaching its collective consultation obligations. Employers are going to have to be very careful about making and managing redundancies going forward.  In practice, redundancies may need to be more centralised and local/area managers may need to be given less autonomy.

"In practice, I cannot see how collective consultation will work meaningfully if an employer wishes to make one employee redundant in say 21 locations. How are these 21 employees (who don’t necessarily know each other) expected to elect a representative? Once a representative (or representatives) is elected, how are they then meant to comment on ways to collectively avoid redundancies when each location may have a different business reason and each employee may have a different role? I don’t believe that the practicalities have been considered in this - or in fire and rehire.

"Allowing unfair dismissal rights from day one is also significant. In redundancy situations it will mean that employers will need to show there is a genuine redundancy within the meaning of the legislation and also follow a fair process (which includes seeking alternatives) before dismissals.

"It will likely also mean that employers will not call every dismissal a redundancy when the employee has less than two years’ service; this is because many employers use the term redundancy (often with positive motives) when they are actually dismissing an employee for poor performance reasons."

‍An extract of Andrew's comments was published in People Management, 11 September 2024.