Updated Guidance on Fire and Rehire

In January 2023, the Government’s Department for Business, Energy and Industrial Strategy (BEIS) published a draft Code of Practice on Dismissal and Re-Engagement. You can read more on this here. A consultation was also held seeking views on the draft Code. In light of the responses to this consultation, the Government has now published an updated version of the Code, with several changes.

Generally, the Code has been simplified, removing duplication where possible and making provisions more concise and accessible. Some sections of the Code have also been moved (for example, the information-sharing section has been moved closer to the start of the Code) in line with recommendations from the consultation.

The Code now also clearly sets out the information that employers should provide when proposing to make changes to employment contracts, as follows:

• details of the proposed changes;
• an explanation of who will be affected;
• the business reasons for the proposed changes;
• the anticipated timings for the proposed changes and the reasons for those;
• any other options that have been considered; and
• the proposed next steps.

The draft Code had previously stated that, where an employee indicates that they are unwilling to accept proposed changes, the employer should re-examine its plans and business strategy. The updated Code only requires the employer to re-examine its plans, not its business strategy. In re-examining their plans, employers should take feedback from employees and their representatives into account, and should consider the following factors:

• the objectives they are looking to achieve;
• the possible negative consequences of imposing the proposed changes (including damage to reputation, employee relations, retention rates, and risks of industrial action and legal claims);
• whether the proposals could have a greater impact on some employees than others; and
• whether there are any reasonable alternative means of achieving the same objectives.

The requirement for employers to reassess their analysis before making any final decision to dismiss has been removed. However, the Code still stresses that any decision to dismiss and re-engage should be treated as a last resort.

There is no immediate consequence for an employer failing to comply with the Code. However, such failure will be admissible in evidence in court or tribunal proceedings. For certain employment tribunal claims, the tribunal can increase any award by up to 25% if an employer unreasonably fails to comply with the Code or decrease the award by up to 25% if it is the employee who unreasonably failed to comply.

The Code has been put before Parliament. Once it is approved, it is expected to be brought into effect by way of statutory instrument some time in Summer 2024.

While the Code does encourage employers to explore options with employees, rather than simply dismissing and re-engaging them, it does not go as far as banning the practice of fire and rehire outright. The Labour party has suggested that this is what they will do if they win power at the next General Election. Still, for the time being employers are advised to read and follow the Code when they are considering dismissing and re-engaging employees on different terms.

If you would like advice on changing your employment terms or dismissing an employee, please get in touch at [email protected]