FIRMS are being warned that the controversial practice of “fire and rehire” can seriously damage working relations and carries considerable legal risk.

The conciliation service Acas said it had been asked by the government to publish new guidance to help employers explore other options before considering fire and rehire to change workers’ contracts.

Several disputes have flared this year, with unions claiming firms are increasingly threatening workers with losing their job if they do not accept worse pay and conditions.

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.”

Acas advised organisations considering contract changes to fully consult with all affected staff and their representatives to help maintain good workplace relations.

Its report warned workplace tensions can rise if employees feel they have not had the opportunity to inform decisions around proposals or do not support the changes.

Acas said the practice of fire and rehire can damage staff morale, productivity, working relations and lead to industrial action.

It can also lead to expensive legal claims from staff who feel they have been unfairly dismissed or discriminated against, as well as reputational damage which may make it difficult for an organisation to attract new workers, said Acas.

Trust with staff can also be affected, with the risk of losing valued staff because they do not accept the offer of a new contract, the conciliation service added.