The threat of industrial action by British Gas workers has eased after union leaders said the company had “retreated” in a dispute over jobs and pay.

The GMB urged the firm to scrap a threatened “fire and rehire” plan rather than just delay it to the new year.

The union said British Gas has retreated on its original plan which it believed could have seen thousands of employees being told before Christmas they would lose their jobs.

GMB officials said owners Centrica continued to threaten to “set fire” to the terms and conditions of its workforce.

Darren Jones, chairman of the Business, Energy and Industrial Strategy Select Committee wrote to the company with concerns about the “extreme measure”.

Justin Bowden, GMB national officer, said: “It is welcome that Centrica management have woken up, smelled the gas and put a pause on their despicable plan.

“Working with, not against, the workforce and focusing now on serious negotiations that talk about growth not just cuts, is how to address the crisis created by past Centrica leaderships.

“This temporary retreat comes after sustained pressure, condemnation and public and political outcry over the proposal to sack the entire British Gas workforce.

“The company should now do the decent thing and take this fire and rehire threat off the table for good.

“Centrica’s problems were not caused by the loyal engineers, call centre workers and back office staff who have done everything asked of them over years of boardroom mismanagement but have found their jobs in the firing line.”

The GMB had been planning an industrial action ballot among its members before today’s development.

A Centrica spokesman said: “Transforming and restructuring our business to meet changing consumer demands is difficult but we must take action to become more competitive and win back customers.

“We believe reaching an agreement with our unions to modernise our company will unlock the potential to not only protect existing well-paid jobs but also create additional jobs – particularly skilled green jobs – in the future.

“We believe our proposals, which include improvements in productivity and flexibility, asking engineers to work 40 hours per week, 25 days annual leave, private healthcare for all colleagues, and generous sick pay proposals are both fair and very competitive in the market and we continue to hope this allows us to reach agreement with our colleagues.

“We are not changing base pay and pensions, but we need to become more flexible in how we deliver for our customers and we need consistent employment terms for our colleagues.

“Currently we have over 80 different employee contracts and 7,000 variations of terms, as well as agreements that date back 35 years.

“Talks since July remain constructive and we are optimistic that a negotiated settlement can be reached.”

Unison national energy officer Matt Lay said: “Delaying any decision on proposed changes to jobs at Centrica gives more time for everyone to reach an agreement.

“The company needs to find a way to survive the current energy crisis, but this shouldn’t be by making its employees take the entire hit.

“Unions will use the next few months to explore every option available to limit the impact on the workforce.”