Yahoo Finance Fire-and-rehire is a brutal way to rebuild a company. It must be banned
At the beginning of last week, British Gas began retrieving the vans and tools used by hundreds of its gas engineers before one of the largest mass dismissals in recent British history. Days later, between 300 to 400 staff lost their jobs for refusing to sign up to new contract terms imposed by its FTSE 100 parent company.
For some engineers, the British Gas kit used to repair and install the boilers and heating systems of millions of customers across the country had been part of their lives for decades. It was the same equipment used to restore warmth to homes during the early weeks of the Covid-19 pandemic, when engineers clad in PPE stood in the frontline of their employer’s pandemic response.
Today, all that remains of the jobs culled through the company’s “fire-and-rehire” scheme is a graveyard depot of hundreds of British Gas vans, waiting to be redistributed among those who agreed – often under duress, according to unions – to sign up to tougher new contracts.
The company’s aim? Improved productivity. The result? A bitter battle between unions and executives which continues to smoulder.
The tactic is legal, but controversial. In the days after hundreds were sacked for refusing to agree to longer hours and shifts over weekends and bank holidays, more than 126,000 people signed a petition calling on the government to ban fire-and-rehire in the UK. It is illegal in Ireland and Spain, so why not here too?
Trade unions have laid the blame for the row firmly on the shoulders of Centrica’s chief executive, Chris O’Shea.
O’Shea himself admits that raising the strategy early in the company’s talks with unions last summer was misjudged. He believed it was the legally compliant way to proceed. The unions believed it was used as a heavy-handed bullying tactic rather than a measure of last resort.
The chief executive, who was previously the company’s chief financial officer, has shown all the hallmarks of a good “money man”: a keen eye on costs and productivity, and a determination to wrest the company’s future back from the brink of financial collapse. But his ruthless pragmatism has perhaps clouded the very human consequences of his actions.
British Gas had to act to preserve its financial future, but it did not have to treat its workforce unfairly in doing so
If your focus is on Centrica’s bottom line, the position is a simple one: under the new terms, British Gas engineers would continue to earn on average £40,000 a year – well above the average annual national wage of £31,461 – and would work an extra three hours a week, or up to 40 hours in total. Yes, engineers would forgo extra pay for working weekends and bank holidays, but the new economy requires this of many service industry employees, O’Shea has argued.
But to view this issue in the black and white terms of contracts and employment law is to miss the point. For many British Gas workers, the commitment they have made to the company, often over decades, goes beyond a contract to form the basis on which they have built families, care networks and lives.
To have your contract rendered null and void is a shock for any worker, but to disregard the lives that thousands of employees have built around their nine-to-five reveals at best a troubling indifference to the humanity of the staff, and at worst contempt for the loyalty many have shown the company for much of their working lives.
British Gas had to act to preserve its financial future, but it did not have to treat its workforce unfairly in doing so. In the wake of the Covid crisis, there will be many more companies facing difficult decisions, but fire-and-rehire should not be among them. If the government expects the public to believe this country values families over finances, it must act to end this corporate bullying.
A day to remember the South Sea Bubble
The market can remain irrational longer than you can remain solvent. Famous quotes by John Maynard Keynes abound, but this is currently the most resonant.
Consider the evidence. Last Thursday, the US released a whole heap of economic data. There was a sharp drop in the weekly jobless count. There was a near 10% month-on-month increase in retail sales. There was a disappointingly small increase in industrial production as American factories tried – and failed – to keep up with surging demand.
There’s no secret to why this should have happened. The US vaccine programme is going well, the economy is reopening, the government in Washington has been mailing $1,400 cheques to US citizens, and the country’s central bank is committed to keeping interest rates at rock-bottom levels.
So what would rational investors make of it all? The obvious answer is that they would adopt a bearish stance, on the grounds that a period of higher inflation was looming. That belief would push down bond prices – which tend to fall when price pressures are growing – and then share prices would also tumble.
That, though, is not what happened. Bond prices rose and share prices on Wall Street reached new record levels. The chairman of the Federal Reserve, Jerome Powell, has done a masterly job in convincing the financial markets that there will be no early withdrawal of stimulus.
For an illustration of this weird mood, consider the cryptocurrency exchange Coinbase. When it floated on the Nasdaq exchange last week, it was immediately valued at $100bn – a price tag largely based on the idea that it is new. As one commentator pointed out, students of financial history might care to note that exactly 301 years before the Coinbase float – on 14 April 1720 – shares in the South Sea Company went on sale to the public.
Convenient for Deliveroo that riders ‘don’t want their rights’
Deliveroo boss Will Shu claims that riders are behind the company’s insistence that its 100,000 takeaway couriers are independent contractors without rights to holiday pay or sick pay.
Concerns about the future of riders’ status, which has already been successfully challenged in Italy and Spain, helped turn his company’s London flotation into a flop, and as Shu presented debut results last week, analysts peppered him with questions about terms and conditions, including why riders can bring in a substitute to handle deliveries.
This rule makes no sense in the real world and has raised concerns about Deliveroo’s knowledge of who is delivering its food. It was also a key factor in it winning a UK legal battle over employment status.
It’s an example of how far Deliveroo is prepared to go to keep contractor status for riders and raises questions over its assertion to analysts that it could adapt financially to a different employment model. Shu said the only concern was that it could not hire sufficient couriers if it changed their status, as riders valued flexibility “above everything else”. Paying by the hour would mean defining to set shifts and limiting the right to work for other apps at the same time – something the company says riders don’t want.
Maybe riders are relieved that, as non-employees, they were forced to take their IPO bonus in hard cash, not shares, the value of which have slumped more than a third from the opening price.
In fact, there is nothing stopping Deliveroo from offering flexible hours alongside sick pay and holiday pay, as Uber will now do for its drivers. The company can surely predict how many workers it might need at certain times of day and offer a variety of shifts accordingly.
But that wouldn’t suit Deliveroo at all. It wants as many couriers as possible to log on and effectively undercut each other by giving it more choice of riders when it needs them.
It is easy and cheap to have spare riders being paid £0 per hour while they are waiting for jobs. If riders’ unpaid time is called in, Deliveroo’s profits will be even harder to find in future than they have been during a pandemic when the whole nation has been tempted to order in.
