Fire and Rehire: The Current Law

The UK’s first Statutory Code of Practice[1] on dismissal and re-engagement came into force on 18 July 2024, emphasising that the principle of ‘fire and rehire’ should only be used as a last resort. The new Labour Government has indicated an intention to replace this code with a strengthened code of practice to ban these practices entirely. It is expected that this provision will form part of the proposed Employment Rights Bill which is likely to come into force in 2025.

“Dismissal and Re-engagement” occurs when employees do not agree to contractual changes proposed by their employer and the employer dismisses the employee, before either offering to re-engage them or offering to engage other employees, in substantively the same roles, to effect the changes.

The recent Code introduces an obligation for employers to take all reasonable steps to explore alternatives to dismissal and engage in consultation with a view to reaching an agreed outcome with employees.

Under the Code, employers should provide as detailed information regarding proposals as reasonably possible; consider any questions from employees; and engage in meaningful consultation. If there is the intention to opt for Dismissal and Re-engagement, employers should be clear about this to employees and re-examine their proposals before using this as a last resort. Employees should be re-engaged as soon as reasonably practicable and invited to provide feedback about the changes to reduce further conflict.

The Code only applies where the prospect of dismissal and re-engagement of employees was raised with them before 18 July. However, it applies regardless of the number of employees affected and the reasons for seeking to change employees’ terms and conditions.

Whilst failing to follow the Code does not make an organisation liable to proceedings in itself, certain provisions subject employers to legal requirements. Employers should also be aware that it is admissible in evidence in proceedings before a court of tribunal and can result in a tribunal:

• Increasing any award it makes by up to 25%, if the employer has unreasonably failed to comply with the Code; or
• Reducing any award by up to 25%, where it is the employee who has unreasonably failed to comply.[2]

Although employers should be aware of the newly introduced Code, it is essential to stay up to date with the new Labour Government’s plan. This is likely to restrict fire and rehire to especially limited circumstances, such as where the alternative is bankruptcy or mass redundancy…watch this space for further updates.

[1] https://assets.publishing.service.gov.uk/media/65d35c10423931826ab7b8a0/draft-statutory-code-of-practice-on-dismissal-and-re-engagement.pdf

[2] S 207A 1992 Act