Update: Fire and rehire

The Code of Practice on Dismissal and Re-engagement (the Code) came into force on 18 July 2024.

An Order giving employment tribunals the power to adjust compensation for a failure to follow the Code was delayed. The draft Order has now been published and will come into force on 20 January 2025.

Background

Following the unlawful redundancies carried out by P&O Ferries in 2022, the government announced that it would issue a new statutory Code of Practice to regulate the use of ‘fire and rehire’ practices. The Code outlines a step-by-step process for employers to follow when changing employees’ employment contracts, which could lead to dismissal and re-engagement.

It was anticipated that the government would bring into force a draft Order simultaneously, but it did not gain approval from the House of Lords before the general election.

The draft Order

Where an employer fails to inform and consult the employees’ representatives when proposing to make 20 or more redundancies, an employment tribunal may order an employer to pay its employees a ‘protective award’, which is an award of up to 90 days’ pay per employee.

Under the draft Order, where there is a claim for a protective award, and it appears to an employment tribunal that the Code applies, an unreasonable failure to comply will allow for an increase or decrease in the award by up to 25%.

Comment

As an employer, you should familiarise yourself with the requirements of the Code at an early stage when considering making changes to terms and conditions of employment, which could lead to the dismissal of one or more employees.

Whilst the Code reflects the current position, we can expect further changes in this area over the next couple of years, with the Government currently consulting on measures within the Employment Rights Bill, which are intended to make fire and rehire unlawful unless the business is in significant financial difficulty.

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