The Code, which is awaiting approval by Parliament and if approved will be brought into practice later this year, grants courts and employment tribunals the power to increase employees' compensation by 25% should their employer not comply.
It also encourages employers to engage employees in meaningful discussion when changing their terms of contract and consult trade unions for guidance, rather than resorting to fire and rehire tactics.
Emma Wayland, employment partner at Keystone Law, told HR magazine that the new Code of Practice does not go far enough to prevent employers from using fire and rehire tactics.
She said: “Fire and rehire has long been a controversial means for employers to circumvent the general rules on changing terms and conditions of employment.
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“Its use is generally considered acceptable only as a last resort where all other avenues have been exhausted and a company has no other options available to it.”
She added that instead the Code is aimed at preventing fire and rehire being used as a tactic to force through changes without having made genuine efforts to agree new terms with the employee.
She said: “In effect, it codifies the general principle that fire and rehire should be a last resort and provides employees with the potential to be more adequately compensated for their employer’s poor behaviour, although the Code stops short of providing a standalone remedy similar to a protective award.”
Wayland added that the guidance might not provide employees meaningful protection against firing and rehiring.
She said: “The cynical might say that this can be treated as a tick-box exercise that will present no more than a minor inconvenience to an employer, for whom the threat of fire and rehire can still be used.”
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Wayland also noted that the government was likely pressured to address this issue by recent reports of employers using the option of fire and rehire as a threat to bully employees into submission.
Cruise operator, Carnival UK, was called out in November 2023 for threatening employees with fire and rehire if it could not reach an agreement over new terms of employment, which would have resulted in pay cuts of 20% and changed employees’ working conditions.
Paul Nowak, general secretary of Trades Union Congress (TUC), agreed that the Code would not prevent employers from using fire and rehire.
He said: “This code lacks bite and is not going to deter bad employers, like P&O, from treating staff like disposable labour.
“We need far more robust legislation to protect people at work, tinkering around the edges is not going to cut it."
A 2021 poll by TUC showed that one in 10 workers were threatened with fire and rehire during the height of the Covid-19 pandemic.
Nowak suggested that Labour’s pledge to end hire and refire would be more effective.
He added: “Labour’s New Deal for Working People would be the biggest upgrade in workers’ rights in a generation. It would put an end to fire and rehire and would provide millions with the security they badly need.”
A spokesperson from Carnival Corporation, which operates P&O, told HR magazine that it was studying the new Code of Practice to understand it better in the context of its operations.
The spokesperson said: "It is not our practice to dismiss and re-engage staff as a negotiating tactic or for any other reason.
"We know our team members are at the heart of delivering unforgettable happiness by providing extraordinary cruise vacations to millions of guests each year, so maintaining good employment relations is a business imperative."
