New statutory guidance on fire and re-hire

Employers sometimes want to change the terms and conditions of their employees, such as a reduction in pay, reduced hours, or a change in working location. These changes are usually the result of a company losing money and/or a reduction in workload and needing to cut cost.

If an employee does not agree to a contract change, an employer may seek to introduce it by dismissing the employee and then re-hiring them on revised terms. This is dismissal and re-engagement or more commonly known as, fire and re-hire.

Fire and re-hire hit the headlines back in 2022 when P&O Ferries controversially fired 800 of its staff and recruited other workers to replace them. Since then, there has been growing pressure for the practice to be banned, or at least have tougher regulation.

The Statutory Code

A new statutory code of practice on dismissal and re-engagement (the “Code”) came into force on 18 July 2024.

The Code aims to ensure employers take all reasonable steps to exploring alternatives to fire and re-hire in meaningful consultation, with a view to reaching an agreed outcome with employees and/or their representatives. It provides practical guidance on avoiding, managing and resolving conflicts and disputes that may arise.

Key points

Some key points of the Code are:

• Fire and rehire should only be used as a last resort.
• An employer must have made all reasonable attempts to reach agreement with their employees about any proposed changes, before considering fire and re-hire.
• Once an employer becomes aware the proposed changes are not agreed, they should re-examine them. The employer should consider feedback from employees and/or their representatives.
• Employers must explore alternatives to fire and re-hire.
• Employers should contact ACAS for advice before raising the prospect of fire and re-hire with employees.
• Employers should not threaten dismissal if it is not actually envisaged.
• Employers must not use threats of dismissal to coerce employees into signing new terms and conditions.
• There is a requirement for employers to “consult for as long as reasonably possible in good faith, with a view to reaching an agreed outcome.” There is no minimum time period.

Claims

There is no stand-alone claim for failure to follow the Code. However, the Code will be taken into account by Employment Tribunals in relevant cases, such as unfair dismissal, and the Tribunal will have the ability to uplift any compensation awarded by 25% if an employer unreasonably fails to follow it.

Future changes

There are some question marks over how long this Code will be in force as Labour have pledged to legislate to end fire and rehire, so further changes may be on the horizon.

Next steps and further support

Employers considering ‘fire and re-hire’ need to take action now, to ensure compliance with the new Statutory Code.

If you require any further guidance or support on the issues covered in this article, book a free 30-minute consultation with a member of our Employment team today.

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This content is correct at time of publication