The end of Zero Hour Contracts: ‘Fire and Rehire’ no more

In addition to proposing a single category of worker and extending day one rights, Labour looks set to seek to ban the practice of fire and rehire and limit the use of zero-hour contracts. 

Fire and Rehire

In March 2022, P&O Ferries hit the headlines after around 800 workers’ contracts were terminated. There followed a debate surrounding the practice of ‘fire and rehire’, which, broadly speaking, involves dismissing an individual only to rehire them, often on different, less favourable terms. 

In the context of employment rights and unfair dismissal, these dismissals can potentially be fair, but employers should first consult with employees prior to dismissal and seek their agreement to a change in terms, and secondly, have a sound business reason that can be evidenced for making such a change. 

Labour has pledged to ban the practice. Meanwhile, the government are introducing a Statutory Code of Practice on Dismissal and Re-engagement which will come into force in July 2024. The new Code will not ban fire and rehire but will make it clear that dismissing an individual before rehiring them on different terms is to be the last resort.

If individuals are dismissed on grounds that would be considered unfair under the Employment Rights Act 1996, the employer will still be liable for claims for unfair dismissal. Such claims bring with them time, costs, risks and uncertainty and may be unsettling for retained workforce members. Employers should also be mindful that the costs of firing and rehiring individuals may extend beyond any negotiating table. Should the process become acrimonious and unfair, businesses can suffer reputational damage to their brand, and these practices may impact recruitment and retention. As so often is the case, good and early communication and consultation will help identify issues and support sound business decisions with an understanding and engaged workforce whilst helping to reduce the risk of Tribunal claims.  

Banning Zero Hour Contracts

Labour has promised to curtail the use of zero-hour contracts, which have drawn criticism for their potential to be exploited by unscrupulous employers. 

When used correctly, they play a useful role in the economy, helping employers in seasonal industries manage demand whilst offering individuals flexibility to work around other commitments.

It has been reported that there will not be a complete ban on zero-hours contracts, as “workers could opt to stay on zero hours”.Rather than giving the flexibility back to the individual, this could lead to the employer exploiting their bargaining position to force the individual to opt for a zero-hour contract. 

Labour would also introduce a requirement that standard contracts be given to workers with regular hours for 12 weeks or more. 

Legislation is already expected to come into force in September 2024, giving workers and agency workers the right to request a predictable work pattern where there is a lack of predictability. There is likely to be a minimum service requirement of 26 weeks, and workers will be able to make two applications in a 12-month period. 

Labour has stated that fixed-term contracts will not be outlawed. Zero-hour contracts will remain available for employers seeking to engage seasonal staff. For reference, the longest a fixed-term contract can be is four years, and it is unclear whether Labour would shorten this for the purposes of fixed-term zero-hour contracts. 

We recommend employers exercise caution before entering into potentially long-term zero-hour contracts and consider whether the same objectives can be achieved through other means, including part-time employment, annualised contracts (which set out the hours to be worked by an employee across a year), fixed-term contracts, or offering overtime and additional training to employees to cover different job roles. 

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