Changes to ‘Fire and Re-hire’ Practices In Force
On 18 July 2024, the Statutory Code of Practice on Dismissal and Re-engagement came into force. Dismissal and re-engagement is otherwise known as ‘fire and rehire.’ This is when an employer proposes to introduce a change to contractual terms by dismissing and rehiring an employee if the change cannot be mutually agreed between the parties.
The Government firmly opposes the use of this practice being used as a negotiating tactic. In March 2022, the Conservative government announced its intention to introduce a statutory Code of Practice to encourage employers to act fairly and reasonably when seeking to change employee terms. After a period of consultation in relation to a draft Code of Practice, a revised version was published in February 2024. When sat in opposition, Labour criticised the Code for not going far enough. However, as part of its pledge to bring forward legislation within its first 100 days to put an end to this practice, Labour’s Secretary of State for Business and Trade has confirmed that the revised Code of Practice will come into force to offer some protection to employees now, but it will be replaced with a strengthened version in due course.
Some of the key provisions of the statutory Code of Practice are as follows:
- Dismissal and re-engagement should be used as a last resort and alternatives explored in the first instance.
- The period of consultation should be meaningful and carried out for as long as reasonably possible with a view to reaching an agreed outcome. There is no minimum time required for the consultation period.
- The employer is advised to contact ACAS before raising the prospect of dismissal and re-engagement with its employees. Any such proposal should also be re-examined and feedback from employees and/or their representatives considered.
- The threat of dismissal and re-engagement should not be used if dismissal is not envisaged, and it should not be used to coerce employees into signing new terms and conditions.
- A failure to follow the Code of Practice does not give rise to a standalone claim in the Tribunal. Instead, the Tribunal could increase or reduce compensation for certain claims, including unfair dismissal, by up to 25% for these failings.
- Claims for a protective award relating to collective consultation are not currently subject to the compensation adjustment.
As stated above, although this Code of Practice is now in force, Labour has committed to replacing it with a strengthened version in due course so watch this space!
If you have any queries in relation to changing the terms and conditions of employees in your business, please do not hesitate to contact a member of our team.