PRESS RELEASE: Employment Rights Bill leaves fire-and-rehire loopholes wide open, think tank warns

The UK government’s proposed Employment Rights Bill fails “the very workers it claims to protect”, says the Institute of Employment Rights (IER), a think tank supported by unions and law firms.

The legislation as it stands leaves loopholes that would still allow rogue employers to act like P&O Ferries, which dismissed nearly 800 workers without consultation in March 2022 and replaced them with lower-paid agency staff.

That scandal led to public outcry and calls for legislative change to ban ‘fire and rehire’ practices. Yet, three years on, the IER warns that the government’s current proposals do not go far enough to prevent similar abuses.

The IER believes that the Employments Rights Bill, which claims to ban fire and rehire—where employers dismiss staff and rehire them on worse terms—contains significant loopholes that could allow exploitative employment practices to continue.

Despite government pledges to crack down on fire and rehire, the Bill allows dismissals under ‘likely financial difficulties’. Without a clear legal definition, the IER argues this provides a backdoor for employers to continue imposing worse terms on workers. Under the current Bill, a business does not have to prove ‘likely financial difficulties’ to an independent financial auditor, leaving this loophole open to abusive employers.

There are also no strict penalties for companies that breach the rules, like P&O who admitted to simply costing in the fine for breaking the law.

James Harrison, director of the IER, said: “The government’s proposed ban on fire and rehire is riddled with loopholes that could render it meaningless.

“If rogue employers can still dismiss staff and impose worse conditions under the guise of ‘likely financial difficulties,’ this Bill is failing the very workers it claims to protect.

“If P&O were to happen under this new legislation, it would all happen in exactly the same way, as there is nothing in the new law to stop a company from replacing workers with agency staff on lower pay and worse conditions.

“Without meaningful penalties, tighter legal definitions, and properly resourced enforcement, we are back to square one. We’ve had inadequate protection for working people for a long time now, with employers having way too much power. This has to end.”

Without strengthening the Bill, the UK is also falling behind global labour protections, as the International Labour Organization (ILO) and the European Union require much stronger safeguards and enforcement measures to prevent unfair contractual changes.

The IER is advising for urgent amendments to the Bill, including a clear definition of ‘financial difficulties’ and how that is independently verified, to prevent misuse by employers. There also needs to be stronger, well-resourced state enforcement mechanisms with penalties to deter fire and rehire practices. It also urges greater alignment with international standards to ensure UK workers receive the same protections as their European counterparts.

It is also advocating for stronger worker protections, including immediate reinstatement with full pay for those likely to have been unlawfully dismissed, as well as the removal of compensation caps for unfair dismissal and breaches of collective consultation rules.

Mr Harrison added: “As the Bill progresses through Parliament, the IER urges the government to consider action to close these loopholes and deliver meaningful protection for workers. Without these changes, fire and rehire will remain a legal loophole rather than an outlawed practice.”

For more information on the IER’s resources on strengthening the Employment Rights Bill, visit: https://www.ier.org.uk/resources/the-employment-rights-bill-erb-2024/.

To learn more about the IER’s work, visit: https://www.ier.org.uk/.

For all media enquiries and to set up an interview, contact Carolyn Pugsley  carolyn.pugsley@freshwater.co.uk or call 029 20 30 40 50 / 0779 052 7258.

Notes to editors

The IER is a well-respected think tank on employment rights and labour law. It has existed for 35+ years to inform the debate around trade union rights and labour law by providing information, critical analysis and policy ideas through our network of academics, researchers and lawyers.

The IER’s 35+ years of work culminated in 2016 a ‘Manifesto for labour law’. This, and its following publication ‘Rolling out the manifesto for labour law’ are widely acknowledged as the blueprint for what eventually became the precursor policy documents for the government’s Employment Rights Bill. As the originators of these policies, the IER is well placed to analyse whether the government are sticking to what they have promised to do.

The IER has produced a podcast, where its experts analyse what is and isn’t in the government’s Employment Rights Bill. It has also produced a list of provisional amendments that might be made to the Bill to make it more effective. It has authored many reports, including most recently:

• AI and workers’ rights
• Pay review bodies – their past and their future
• Redistribution of working time: achieving a better work-life balance
• Migration and work in post-Brexit UK
• Working for climate justice
• Work and health: 50 years of regulatory failure

All of its experts volunteer their time to write and comment for us for free. The IER is funded by working people, their trade unions and project funders.

Visit www.ier.org.uk or follow IER on X @IERUK