One to watch: ‘Fire and rehire’ practices under government consultation

The government has recently published a consultation for a new statutory code of practice to tackle the controversial ‘fire and rehire’ process. This process allows employers to fire employees and offer to rehire them on often less favourable terms and conditions.

A high-profile example of this is P&O Ferries who dismissed around 800 employees in 2020 and then offered to rehire them but on reduced terms and conditions.

The new statutory code of practice, currently in draft form, looks to provide employee protection by setting out employers’ responsibilities when considering changes to contractual terms and conditions of employment.

Such responsibilities include, but are not limited to, a detailed consultation process about proposed changes, not using the threat of dismissal as a negotiating tactic and looking into all possible alternatives to dismissal. The code will also help protect employers by setting out fair and transparent steps to follow which should minimise the potential risk of any legal claims.

While the code would not impose legal obligations in their own right, employment tribunals would be able to consider it and apply an uplift of up to 25% to compensation in cases where an employer has unreasonably failed to comply with it. Compensation could also be decreased by 25% where an employee has unreasonably failed to comply with the code.

For businesses and employers, the draft code raises questions about its application in practice such as what to do if, in this fragile economic climate, a decision about contractual changes is needed to be made swiftly – and some have questioned what the code means for business flexibility.

If the code is implemented following the consultation, we will provide further updates on what employers need to do to comply.