Fire and rehire practices are when an employer dismisses an employee and then reoffers them a job with different terms or pay. The new code grants courts and employment tribunals the power to increase employees' compensation by 25% if the employer does not comply with best practice around firing and rehiring.
The code also encourages employers to engage employees in meaningful discussion when changing the terms of their contract, and to consult trade unions for guidance, rather than resorting to fire and rehire tactics.
This code, along with the government’s plan to ban zero-hours contracts, could exacerbate job losses at times of financial difficulty, according to Robert Forsyth, partner in law firm Michelmores' employment practice.
Speaking to HR magazine, he said: "While these reforms aim to safeguard employee rights, the practical implementation remains unclear. Employers will have new challenges, particularly in responding to economic downturns without the flexibility of zero-hours contracts or fire and rehire strategies."
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Forsyth said that businesses must prepare for these changes by updating contracts and policies, adding: "Employers must act swiftly to adapt to these significant reforms. Failure to do so could result in substantial financial consequences."
In 2022, P&O Ferries fired 800 of its staff without consultation, replacing them with agency workers. Although this was not a conventional fire and rehire incident, it did prompt a consultation which resulted in the new Code of Practice.
Bob Cordran, head of employment at the law firm Memery Crystal, described the new code as not strong enough to tackle the issue of businesses firing and hiring, partly as plans to increase fines when businesses do not consult on collective redundancies were not put in place before the change of government.
He told HR magazine: “The Code is unlikely to have a significant impact on the practice of fire and rehire, not least because the planned ability of employment tribunals to uplift protective awards for failure properly to inform and consult on collective redundancies did not make it through to the statue books.”
However, Cordran said that Labour’s manifesto pledge to end fire and rehire would mean that the code is likely to be strengthened in the near future: “In any event, the government has already indicated that it will legislate within its first 100 days to end the practices of ‘fire and rehire’ and ‘fire and replace’, which will inevitably mean that the Code will be substantially amended or replaced entirely.”
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The new Code was created to ensure that employers take reasonable steps to explore alternatives to dismissal, for example by consulting and collaborating with employees to reach an agreed outcome, an employment law contact told HR magazine. They added that it offers practical guidance to employers and employees, effectively promoting dismissal and re-engagement as a last resort.
