What is the new code of practice on dismissal and re-engagement?
The new code aims to address the practice amongst some employers of dismissing employees and re-hiring them on new, less favourable terms, something which became more prevalent following the pandemic and the subsequent need for businesses to reduce hours and overheads. The most egregious example of the use of ‘fire and rehire’ in recent years was it’s use by P&O which made national headlines and spurred this change
Although there isn’t a direct claim for breaching this code, tribunals can increase compensation by up to 25% if an employer unreasonably fails to follow it.
Why has this code been introduced?
The previous government didn’t go so far as to ban the practice of fire and rehire outright, expressing the view that where all other courses of action have been attempted, an employer may be faced with no alternative. However, the code is clear that the practice of dismissing employees and re-engaging them on less favourable terms carries significant risks and should only be used as a last resort.
For example, employers who resort to this option run the risk of employees resigning and claiming constructive unfair dismissal citing a breach of their previous terms and conditions.
How long will this code be in force?
Whilst the code is in force for the time being, the new Labour government has indicated its intention to bring forward an Employment Bill within their first 100 days which is likely to include plans for ban fire and rehire completely. As such, the code might be relatively short-lived.
In the meantime, the code has legal force and employers should ensure they are aware of its provisions and follow it in situations where the need to consider dismissal and re-engagement arises.
The key provisions employers should be mindful of are:
1. Exhaust all other options: Before considering ‘fire and rehire’, employers should explore all possible alternatives and consult with their workforce on these.
2. Consultation: Employers must consult with affected employees ‘for as long as reasonably possible’. There isn’t a set minimum duration, but early and clear communication about the proposed changes and their reasons is crucial. It is advisable to contact ACAS at an early stage before raising the possibility of ‘fire and rehire’ with their workforce.
3. Timing and communication: It’s important not to mention dismissal and re-engagement too early and certainly not before it is actually seen as a possibility, or as a threat to coerce employees into agreeing to new terms and conditions. This could damage trust and potentially lead to claims of constructive unfair dismissal.
4. Consider feedback: If employees disagree with the changes, employers should reconsider and possibly adjust the proposals. Introducing changes gradually or reviewing them later might be beneficial.
5. Written confirmation: Any agreed changes should be clearly communicated in writing, including when they will take effect.
Only where an employer has followed a thorough and open process of sharing information and consulting on proposed changes should they consider the possibility of dismissal and re-engagement on new terms which should always be treated as a measure of last resort.
Why following the code matters
Following the code isn’t just about avoiding financial penalties, as unreasonable failure to follow the code could result in an employment tribunal awarding an uplift of up to 25% on any Tribunal Award.
It provides a structured approach to handling changes in employment terms. Employers should be aware of its guidelines, consult thoroughly with their employees, and use ‘fire and rehire’ only as a last resort. This careful, consultative approach not only aligns with legal expectations but also promotes a healthier workplace culture and can prevent disputes.
If you wish to discuss anything in this article or any employment matters you may have please contact Matthew Ottley or a member of our employment team.
What is the new code of practice on dismissal and re-engagement?
The new code aims to address the practice amongst some employers of dismissing employees and re-hiring them on new, less favourable terms, something which became more prevalent following the pandemic and the subsequent need for businesses to reduce hours and overheads. The most egregious example of the use of ‘fire and rehire’ in recent years was it’s use by P&O which made national headlines and spurred this change
Although there isn’t a direct claim for breaching this code, tribunals can increase compensation by up to 25% if an employer unreasonably fails to follow it.
Why has this code been introduced?
The previous government didn’t go so far as to ban the practice of fire and rehire outright, expressing the view that where all other courses of action have been attempted, an employer may be faced with no alternative. However, the code is clear that the practice of dismissing employees and re-engaging them on less favourable terms carries significant risks and should only be used as a last resort.
For example, employers who resort to this option run the risk of employees resigning and claiming constructive unfair dismissal citing a breach of their previous terms and conditions.
How long will this code be in force?
Whilst the code is in force for the time being, the new Labour government has indicated its intention to bring forward an Employment Bill within their first 100 days which is likely to include plans for ban fire and rehire completely. As such, the code might be relatively short-lived.
In the meantime, the code has legal force and employers should ensure they are aware of its provisions and follow it in situations where the need to consider dismissal and re-engagement arises.
The key provisions employers should be mindful of are:
1. Exhaust all other options: Before considering ‘fire and rehire’, employers should explore all possible alternatives and consult with their workforce on these.
2. Consultation: Employers must consult with affected employees ‘for as long as reasonably possible’. There isn’t a set minimum duration, but early and clear communication about the proposed changes and their reasons is crucial. It is advisable to contact ACAS at an early stage before raising the possibility of ‘fire and rehire’ with their workforce.
3. Timing and communication: It’s important not to mention dismissal and re-engagement too early and certainly not before it is actually seen as a possibility, or as a threat to coerce employees into agreeing to new terms and conditions. This could damage trust and potentially lead to claims of constructive unfair dismissal.
4. Consider feedback: If employees disagree with the changes, employers should reconsider and possibly adjust the proposals. Introducing changes gradually or reviewing them later might be beneficial.
5. Written confirmation: Any agreed changes should be clearly communicated in writing, including when they will take effect.
Only where an employer has followed a thorough and open process of sharing information and consulting on proposed changes should they consider the possibility of dismissal and re-engagement on new terms which should always be treated as a measure of last resort.
Why following the code matters
Following the code isn’t just about avoiding financial penalties, as unreasonable failure to follow the code could result in an employment tribunal awarding an uplift of up to 25% on any Tribunal Award.
It provides a structured approach to handling changes in employment terms. Employers should be aware of its guidelines, consult thoroughly with their employees, and use ‘fire and rehire’ only as a last resort. This careful, consultative approach not only aligns with legal expectations but also promotes a healthier workplace culture and can prevent disputes.
If you wish to discuss anything in this article or any employment matters you may have please contact Matthew Ottley or a member of our employment team.