Fire and Rehire: Upcoming Government Guidance

“Fire and rehire” has been a hot topic lately, especially after P&O’s controversial dismissal of all their staff in 2022. While technically not a true “fire and rehire” (they hired entirely new crews), it sparked outrage and a government response.

To address concerns, a new Code of Practice for fire and rehire will be enforced this summer. This sets out best practices for employers and potential consequences for those who violate them. So what does that mean for employers?

What is “fire and rehire”?

“Fire and rehire” is the practice of terminating an employee’s contract, by giving them the correct notice, and immediately offering to re-employ them on different terms. “Fire and-rehire” can be used as a last resort to impose new terms and conditions on employees if negotiations fail.

What are the risks?

• If you dismiss an employee who has more than two years’ service, you’ll always face the risk of an unfair dismissal claim. This risk doesn’t go away just because you may have offered to re-employ them on new terms.
• If you’re proposing firing and rehiring a significant numbers of staff, you’ll also need to follow collective consultation procedures under redundancy law – if you don’t, there are harsh financial penalties.
• Employee rejection is a possibility. This could lead to a staffing shortage until you find suitable replacements, potentially causing delays or disruptions in your operations.
• Finally, and most importantly, your organisation’s reputation will be at risk. Disgruntled employees can quickly damage your reputation through word-of-mouth and online platforms like Glassdoor. This negative feedback can spread widely and linger for a long time. Additionally, morale and loyalty can suffer when you rehire staff after dismissal. Working with a potentially disengaged workforce can create challenges.

Negotiation and Agreement

For all these reasons, it’s often best to try to negotiate and agree contractual changes with your staff. If contractual changes is important to and for your business, there may be things you can offer your staff in return– perhaps an extra day’s annual leave, or the opportunity to hybrid once or twice a week. It’s also possible to offer a one-off bonus in recognition of staff agreeing new terms. While you don’t have to offer any of this, it’s good to remember in any negotiation, “wins” for both sides are important.

If you can’t reach agreement, the negotiations will be time well spent to understand the concerns your staff have and give you an opportunity to address them. It’ll also help them understand your requirements and why you believe changes to their contracts are necessary.

Breaking down the code

Essentially, the Code asks you, as an employer to:

• Share as much information with staff as possible about the proposed changes and your reasoning;
• Consult with affected employees;
• Consider any adverse impact to any staff under anti-discrimination and equality laws;
• Try to negotiate any changes with employees and / or their representatives;
• Don’t use dismissal and re-engagement as a threat to put pressure on staff to agree to changes;
• Continue to re-assess the business reasons and analysis in the light of feedback from consultation throughout the process;
• Only use dismissal and re-engagement where all other steps to secure agreement have failed;
• Speak to ACAS for advice before raising the prospect of dismissal and re-engagement.

Ignoring the Code

Failing to follow the fire and rehire Code during dismissal can significantly increase your financial risk. If an employee claims unfair dismissal, the Employment Tribunal could rule in their favour and award them up to 25% more compensation.

Always take advice first

Considering contract changes? Fire and rehire might not be the answer. Most employment contracts come with a degree of flexibility, and some give the employer a “right” to make changes. But as with much of employment law, what’s written down in a contract is only part of the story, and fairness plays a big part – so don’t rely on these clauses.

This means that while following the new Code on “fire-and-rehire” might not be your first consideration when thinking about contract changes, it shouldn’t be overlooked. So always take advice before you start.