Trade unions have accused the owner of British Gas of using the Covid-19 pandemic as a “smokescreen” to force its 20,000 employees to accept worse employment contracts – or lose their jobs.

Centrica is in talks to “simplify” the wide range of employment contracts used across its 20,000-strong workforce, having announced plans last month to axe 5,000 jobs.

But talks between Centrica’s management and trade union representatives have reached breaking point over so-called “fire and rehire” plans, which unions fear could erode the employment terms of thousands of workers.

British Gas was forced to assure employees this week that the company would only seek to terminate existing contracts and offer fresh terms, known as a section 188 notice, as a “last resort” if the “challenging” talks with unions fell apart.

Unions have accused the company of raising the possibility of a section 188 notice in the aftermath of the coronavirus outbreak to “blackmail” staff into agreeing to lower pay and tougher contract terms, following record losses at the company prior to the pandemic.

Unite said the “smokescreen” was part of a “disturbing trend” among some of Britain’s biggest employers and called for Centrica’s management to undertake an “urgent rethink” of their plans.

Referring to proposals by British Airways to change terms and conditions for thousands of staff under a section 188 notice, Mark Pettifer, the regional officer for Unite, said: “Centrica is adopting the same tactics as British Airways and is using Covid-19 as a smokescreen to cut jobs of loyal and dedicated staff who have worked through the lockdown providing energy to the nation.

“Unite urges the Centrica management to have an urgent rethink and engage constructively with the trade unions to tackle the specific issues facing Centrica and, more generally, the UK energy sector post-Covid-19,” he said.

Centrica crashed out of the FTSE 100 earlier this year after more than five years of decline, due to rising competition in the energy market from a string of low-cost energy supply start-ups.

The owner of Britain’s biggest energy supplier has lost about 1 million customers in the last two years and reported a £1bn loss for 2019 before scrapping its shareholder dividend and warning investors there would be a steep slump in revenues in 2020.

The company’s share price has fallen to a tenth of its value in 2013, and its market value reached record lows in April just weeks after the company replaced its chairman and ousted its outgoing chief executive with immediate effect.

Matthew Bateman, the managing director of British Gas, told employees via a video meeting this week that there was a possibility that the company may need to give notice to all employees that their current terms and conditions would be ended and new terms offered.

Bateman added that the section 188 notice was “a normal legal step” which was “really, firmly our backstop position” to ensure that the talks with union representatives “don’t take too long”.

“We know this is an emotive subject and we also know that it will cause further anxiety for our teams,” he said.

A spokesperson for Centrica said: “We’ve been open about the changes we need to make to win back customers, grow our company and protect jobs in the long run. Our employees’ base pay and pensions will be protected but simplifying and modernising their terms is essential if we’re to become more flexible and price competitive.

“We understand the impact this will have on colleagues and this is not an option we want to use but we must make these changes and we must conclude these talks before the winter period,” they added.