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Decoding “Fire and Re-hire”: The New Statutory Code of Practice

For those who may not be aware, ‘fire-and-rehire’ (also known as dismissal and re-engagement) is a common tactic employed by organisations seeking to change the terms and conditions of an employee’s contract. Employment contracts cannot be changed unilaterally – that is, they can’t be changed without the express consent of both the employer and the employee. In circumstances where the older and often more favourable terms are not commercially viable, and where employee consent is not given, employers may resort to dismissing the employee and then re-engaging them on the new terms to achieve their proposed changes.

Perhaps unsurprisingly, this approach is not without risk. Fire-and-rehire, before the two-year mark, is not illegal. However, you only need to type the phrase into Google to find a host of articles about companies embroiled in discourse about whether it’s ethical; Tesco, British Airways, and British Gas to name just a few. From the comments beneath these articles (and the inflammatory wording in the titles), it’s clear that the optics aren’t fantastic.

On Tuesday 24th January 2024, the Government announced its intention to crack down on fire-and-rehire by introducing a statutory Code of Practice on Dismissal and Re-engagement to ensure that employers have “honest and open-minded discussions” with their staff. This Code is now set to be introduced in England, Scotland and Wales on 18th July 2024. As of this date, employment tribunals will have the power to award a 25% uplift in compensation awards to Claimants whose employers have “unreasonably failed” to follow the Code. While there is still no ban on the practice despite the new Code coming into effect, employers should try to ensure that they are aware of their obligations and of the consequences of non-compliance. 

But that might not be the end of the story.

Labour, who (as of today’s date) look set to emerge victorious from the upcoming election, have announced their intention to strengthen the Code further. Rachel Reeves went so far as to state that the party would end fire-and-rehire except for in extreme circumstances where there is “no alternative” – but what does that mean in practice? At this stage, it’s hard to say. It will almost definitely be a matter for the employment tribunals. To mitigate risk, employers should always seek legal advice where they are intending on making changes to employee’s terms and conditions of employment. If you would like to discuss any issues raised this article or another employment law matter, please don’t hesitate to get in touch with our Employment team.