I would be interested to see that list. As I said, we want to make sure that we can tackle that early basis, which I outlined earlier.
As I said, we are considering fire and rehire from all angles, and we have continued to gather and review evidence beyond the ACAS report. It is difficult to find robust evidence on the practice, because what is seen by workers as a threat or tactic can be seen by employers as necessary behaviour to move negotiations forward and out of deadlock. What is a reduction of terms and conditions for workers can sometimes be necessary organisational change for employers.
We heard a bit about the various surveys that have been going on. The hon. Member for Brent North referenced an earlier CIPD survey. We now have further survey data based on a sample of more than 2,000 senior HR professionals and decision makers in the UK. Fieldwork for that CIPD employment outlook survey was undertaken during the summer, and it found that 3% of employers with two or more employees used fire and rehire to reduce employment terms of some or all of their staff, and a further 19% of employers said they had changed terms and conditions through consultation, negotiation and voluntary agreement. Around half of those who said they had made changes to pay, location or enhanced entitlements said that they had improved those terms.
The Office for National Statistics business impact of covid-19 survey found that around 3.1% of businesses had reduced terms and conditions since 2020. While the evidence does suggest some use of fire and rehire, it does not allow us to fully understand the circumstances of the employer and the rationale or proportionality of the use of fire and rehire. It is important to consider those business circumstances as we look to draw up solutions.
I would like to draw the House’s attention to the voice of employers, about which we heard much from my hon. Friends the Members for Thirsk and Malton (Kevin Hollinrake), for North East Bedfordshire and for Rugby (Mark Pawsey). The CIPD has shed light on how the
“impact of COVID-19 has had a huge effect on employers, causing operational disruption, increased supply costs, loss of revenue, reduced productivity. They have had to react, adapt and effect change to their processes.”
The context of heightened disruption and business challenges has also meant that some employers have been forced to consider firing and rehiring their employees where an agreement cannot be reached to vary the employment contract. We have said that that should be considered as an absolute last resort if changes to employment contracts cannot be found through negotiation.
The evidence I have just set out shows there is some use of firing and rehiring, or the threat of doing so, by at least 3% and potentially up to 9% of employers to reduce the terms and conditions of some or all staff. Although the evidence does not provide a full understanding of the employers’ circumstances, this House should be left in no doubt that the Government will always continue to stand behind workers and to stamp out unscrupulous practices where they occur.
Existing legislation already provides employers with the right baseline for setting terms and conditions for their workforce, including on the minimum wage, annual leave, statutory sick pay, parental leave, pay entitlements and pension contributions. Above that statutory baseline, employers are rightly free to offer the terms and conditions of employment that best suit their business needs. In doing so, they must always act fairly and not discriminate unlawfully on the basis of a protected characteristic such as race, sex or disability. The valid variation of contractually binding terms and conditions usually depends on mutual agreement between the employer and workers as two parties to the contract.
The employment contract itself may contain a clause expressly allowing variation. Such clauses are usually limited to specific circumstances, and they tend to be interpreted narrowly by courts and tribunals. Should an employer seek to enforce contractual variation without agreement, there are a number of legal obligations and protections with which they may need to comply, depending on the circumstances.
A dismissal may be wrongful if the employer fails to provide the relevant statutory or contractual notice period to terminate the contract. There may be a breach of contract or constructive dismissal if changes are imposed unilaterally by the employer. As we have heard, there are also collective redundancy consultation requirements that apply where there are proposals to dismiss 20 or more employees at one establishment within a 90-day period for reasons not related to the individuals concerned.
These all require an employer to provide certain statutory information and to engage in discussions with a view to reaching agreement either with trade union representatives, where there is a recognised trade union, or with other elected representatives. In workplaces where there is a recognised trade union, employers are prohibited from making offers to workers with the sole or main purpose that any terms of employment will not or will no longer be determined by collective agreement with the union.
It is not all about what the law requires. It is in businesses’ own interest to have committed, motivated staff who are properly engaged in decisions about the future. We have seen in the press and the media the considerable reputational and practical risks, many of which have been cited today, to companies that look to pursue this route. The CIPD wrote:
“Employers must recognise that this approach creates a high risk of legal claims, reputational damage and an adverse effect on employee relations. It should only be undertaken after extensive consultation and consideration of all other alternatives.”
As we have heard, in the vast majority of cases, businesses want to do the right thing by their employees. I am determined to help them do this and to make sure that we find the best approach for both employers and employees. Although I do not believe we should legislate to stop the practice of fire and rehire, and certainly not in the heavy-handed way proposed by the Bill, the Government are taking action.
Earlier this year, we asked ACAS to produce more comprehensive, clearer guidance to help all employers to explore other options before considering fire and rehire. ACAS is well placed to provide that guidance, being an independent Crown non-departmental public body that plays a vital role in promoting and maintaining good industrial relations between employees and employers. We are all well aware of the potential pressures on business as we continue to undergo the impacts of covid-19, but that ACAS guidance will help to set out best practice to employers who are considering how to solve problems that might require contractual changes.
The Government are also taking action in one of the areas where ACAS found that fire and rehire was being used, which is to interrupt the continuity of service. Certain employment rights in the UK require a period of continuous employment, so it is right that we find the right balance between worker protection and flexibility in the labour market. Continuous service is where an employee has worked for one employer without a break, and we will be introducing a measure to extend the permissible break in service from one week to one month as soon as parliamentary time allows. That measure will make it easier for those with intermittent or flexible working patterns to access employment rights, and it will deter businesses from engineering breaks in employment to deny individuals their important employment rights.
To address the Bill specifically, it seeks to amend the law relating to workplace information and consultation, employment protection and trade union rights. [Interruption.] I am glad that the right hon. Member for Islington South and Finsbury (Emily Thornberry) wants to hear my thoughts, as she has turned up for the last 20 minutes of the debate. She did not feel the need to hear the debate itself.
I have met Members of the House and trade unions to discuss the issue, and the discussions have made plain to me the anxiety and distress that has been caused. As the Bill covers a lot of ground, I make it clear, for those Opposition Members who are wearing the badges, that it will have the effect of banning fire and rehire, if enacted. It will leave us in a space where employers may be forced to make redundancies. It will also significantly increase the pressure on the employment tribunal system, as we have heard, when the right priority is to reduce the backlog.
Proposed new section 187A would introduce new consultation requirements for establishments and undertakings where there is a real threat to continued employment. The Government are perfectly clear that, should employers seek to change terms and conditions, they must seek agreement. The threat of fire and rehire should never be used as a negotiation tactic.
In addition, collective redundancy law already provides that, should an employer propose to make 20 or more people redundant in a single establishment within a 90-day period, it must consult with employee representatives. However, this legislation would introduce onerous new requirements on employers in situations where they need to make business-critical decisions. Those requirements would be additional to the collective consultation requirements already in place.
The legislation includes situations where decisions may have to be taken to terminate the contracts of 15 or more employees for reasons other than conduct or capability, or where anticipatory measures are envisaged that are likely to lead to substantial changes in work organisation or contractual relations affecting 15 or more employees.
Proposed new section 187B would place a higher duty on employers to disclose information to allow employee representatives to engage in consultation. The Government already have clear guidance that, if an employer needs to change a contract, the first step is to talk with employees or employee representatives, such as a trade union. The guidance that ACAS is producing will help to set out the best practice for employers considering how to solve problems. In addition, the ACAS code of practice on the disclosure of information to trade unions for collective bargaining purposes sets out the respective responsibilities of employers and employee representatives in matters related to collective bargaining.
Proposed new section 187C would introduce a right for employee representatives to complain to the Central Arbitration Committee about an employer’s failure to consult or disclose information. The CAC is an independent body with statutory powers, but under the Bill, should the CAC find that an employer had been remiss, it could refer it to ACAS for conciliation. If ACAS was of the opinion that further attempts at conciliation were unlikely to result in a settlement, it could then refer it back to the CAC. For complaints referred and returned through ACAS, and where settlement had not happened, the CAC could hold a hearing and determine the complaint. It could then make a declaration stating whether it found the complaint well-founded, wholly or in part, and the reasons for its findings. While the CAC could choose not to recommend a course of action, such as referring to ACAS for early conciliation, it could set out steps to rectify the error and the timeframe in which that should be done.
The House can see that the Bill would add extra layers, which would affect the flexibility of the situation for employers seeking to make business-critical decisions. It is an incredibly complex situation, and we would be adding bureaucracy and extra process when they need to make a decision quickly to protect the jobs and livelihoods of those people who have been mentioned throughout the entirety of this debate. I have real concerns about the approach in the Bill, as it would significantly increase administrative burdens and costs for employers in a situation where they are already facing challenging circumstances.
Proposed new section 104H would disallow an employee not agreeing to reduced terms and conditions as a substantial reason for dismissal and remove the qualifying period of two years to bring forward an ordinary unfair dismissal claim. That would remove the legal ground on which employers may be able to dismiss and re-engage an employee who has not agreed to changing their terms and conditions.
While these measures could result in a decline in the use of firing and rehiring, they would present a significant change to the current framework and could have unintended consequences for businesses and employment tribunals. The hon. Member for Brent North has couched this Bill as proportionate to the issue, but it would have the effect of banning fire and rehire and the unintended consequences of such actions could be severe. For instance, setting that higher threshold for dismissal and for consultations with trade unions on changes to terms and conditions may mean that the cost for employers is so high that they choose an easier route, such as redundancy; in effect, if you get rid of fire and rehire, you end up with fire, which is no good to employees up and down this country.
In the last six seconds available to me, may I just say that we are looking at this Bill, we will act and we do not need primary legislation to do so?