Fire and Rehire: A Guide for Employers

The government released an updated “firing & rehiring” Code of Practice for companies in February 2024. The guidelines are essentially the same as the draft Code that was first released in January 2023, with the exception of a few modifications brought about by public feedback. The Code is now awaiting Parliamentary approval, potentially taking effect later this year.

Subject to parliamentary approval, the Code imposes expected procedures on employers wishing to use fire and rehire. The Code demonstrates that fire and rehire should be a last resort following serious discussions with employees or their representatives.

The practice of fire and rehire is not prohibited, but the new legislative Code carries a significant risk of expensive claims and wider business consequences. Employers need to understand that fire and rehire has a significant impact of harming their reputation and negatively affecting working relationships. It needs to be started only after thorough deliberation and evaluation of all available options.

The key provisions for employers include:

  • Fire and rehire ought to be reserved for extreme circumstances.
  • Employers were obliged by the original draft Code to get in touch with Acas if they could not come to an agreement with employees on fire and rehire. This requirement has now been strengthened and the Code requires employers to contact Acas at an early stage before they raise fire and rehire with the workforce.
  • According to the Code, it is best practice for employers to provide information in writing as opposed to orally.
  • Situations involving redundancy are exempt from the Code. It will, nevertheless, be applicable in situations when the choices of redundancy and fire and rehire are being evaluated. As long as fire and rehire are options, the Code will be in effect.
  • The Code requires employers to consult “for as long as reasonably possible,” but there is no set minimum or maximum amount of time for consultation.
  • Employers are not allowed to coerce employees into accepting new terms and conditions by threatening to fire them.
  • Instead of fire and rehire, employers ought to look at other options. They need to conduct meaningful discussions aimed at coming to an understanding with trade unions and employees.
  • Employers must refrain from threatening to fire employees prematurely or without cause.

Employees are not permitted to file a separate claim based only on an employer’s transgression of the Code. However, if they bring a relevant Employment Tribunal claim arising from a fire and rehire situation (such as unfair dismissal or discrimination), the Employment Tribunal will have the authority to order a 25% increase in the employee’s compensation if the employer has blatantly disregarded the Code.

There is no actual law against dismissal and re-engagement and it is technically possible for an employer to achieve a fair dismissal using this practice. A compelling business case, a reasonable and equitable consultation procedure, and the completion of all procedural and technical requirements would be necessary for this.

If an employer wants to modify the terms of an employment contract, they should first consider:

  • If the contract contains a flexibility clause. Employers are permitted to make “reasonable changes” to some work terms under this clause.
  • If, following a period of consultation, the employee who will be impacted by the change agrees.
  • Alternatively, if the change is approved on behalf of the employee by a trade union or other employee representative.

Employers should always consult with employees in a transparent manner about the business reasons for any proposed changes to terms and conditions and if it is possible to gain agreement to the changes then this is ideal. Note that if a company plans to fire more than 20 workers in a 90-day period, they are legally required to have a collective consultation with employee representatives.

If agreement with employees cannot be reached, it is unlikely to be safe to simply impose the change. The employer might want to consider fire and rehire. When the new Code of Practice comes into effect, it should be adhered to. Since fire and rehire can be a risky decision, think about seeking professional counsel.