Following public consultation, some minor changes have been made since the first draft was published.
In January 2023, following concerns about the use of "fire and rehire" tactics by employers to impose detrimental changes to contractual terms and conditions on employees, a draft code of practice on dismissal and re-engagement was published by the Department of Business and Trade. Following a consultation on a first draft, what is intended to be the final version of the Code has now been laid before Parliament. The UK Government claim this will "crack down on controversial fire and rehire practices."
What does the updated Code say?
The updated Code has not significantly changed from its previous incarnation. The key takeaways are:-
- Dismissal and reengagement should be used only as a "last resort";
- Employers should take all reasonable steps to explore alternatives to dismissal;
- Employers should contact Acas before raising the prospect of dismissal and re-engagement;
- Employers should engage in meaningful consultation with a view to reaching an agreed outcome with employees and/or their representatives "for as long as reasonably possible in good faith";
- It is good practice for employers to provide information in writing;
- Employers should not raise the prospect of dismissal unreasonably early or put undue pressure on employees by threatening dismissal when this is not, in fact, envisaged;
- The Code does not apply to standard redundancy situations;
- The Code applies regardless of the number of employees affected;
- A failure to follow the Code does not in itself make a person or organisation liable to proceedings; and
Where the Code applies to a claim brought before a tribunal then the tribunal can increase or reduce any award it makes by up to 25% if the employer or employee (respectively) unreasonable fail to comply with it. - When it comes to the risk of an employment tribunal increasing or reducing any award of compensation, it is difficult to envisage many ways in which an employee can fail to comply with the Code, whereas employers have a more difficult path to follow. For example, an employer must be open with employees about the risk of dismissal and re-engagement, but not raise it as a possibility unreasonably early.
Although the Business Minister, Kevin Hollinrake, has said that the updated Code will crack down on employers mistreating employees, the reception from unions has not been positive. Both the TUC and Unite have said the Code does not go far enough to deter unscrupulous employers.
What will employers need to do?
Although the introduction of the Code will require employers to be cautious about using dismissal and re-engagement as a way of changing contractual terms, it does not prevent them from using this practice where necessary. However, as well as the risk of increased tribunal awards, the introduction of the Code further raises the profile of this unpopular practice and employers will need to be cognisant of the increased potential for reputational damage alongside damage to industrial relations.
The updated Code, assuming it is approved by both Houses of Parliament, will come into effect at some point later this year.
