Fire and Rehire Statutory Code of Practice: 8 Key Updates

Last year P&O Ferries deliberately sought to evade the law by sacking 786 seafarers without due consultation. Having made no efforts to inform the Business Secretary at the time, they failed to follow best practices or do the right thing for their employees. This has led to the planned introduction of a new statutory code that will crack down on unscrupulous employers that use these controversial dismissal tactics. Business Secretary at the time Grant Shapps said: 

“Our new code will crack down on firms mistreating employees and set out how they should behave when changing an employee’s contract. The government is taking strong action against unscrupulous employers that use the controversial practice of ‘fire and rehire’.”

‘Fire and rehire’ refers to when an employer fires an employee and offers them a new contract on new, often less-favourable terms.
The government has been clear on its opposition to this practice being used as a negotiating tactic and is now making it clear how it expects employers to behave.

The code, subject to a consultation first, will make it explicitly clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms, and that they should have honest and open-minded discussions with their employees and representatives.

Updates to the Fire and Rehire Proposed Code

• Employers should follow detailed steps when making changes to staff contracts. They should keep employees informed and engage in meaningful consultation, exploring alternatives to their proposals.
• Depending on the circumstances, informing and consulting employees should involve unions, employee representatives, and/or individual employees.
• Meaningful consultation means employees understand the employer’s objectives and the nature of the proposals, which may include dismissal.
• Employers should re-examine their business strategies if employee agreement isn’t forthcoming. They should consider potential negative impacts such as reputational damage or damage to industrial relations.
• Employers shouldn’t threaten employees with dismissal if it’s not a real consideration.
• Employers should be flexible in giving notice of any dismissals and consider providing additional notice if particular employees need it, such as for childcare changes.
• Re-engagement of employees on new contracts shouldn’t be used to break employees’ periods of continuous employment, which is important for tribunal claims or statutory payments.
• Finally, employers should consider supporting employees in practical ways, such as offering relocation assistance or career coaching.

Employment tribunals will need to take the Code into account where relevant to any proceedings, such as unfair dismissal and/or discrimination claims. If the employer has unreasonably failed to comply with the Code, a tribunal will be able to uplift any compensation award by up to 25%. This mirrors the current approach in relation to an unreasonable failure to follow the statutory ACAS Code on Disciplinary and Grievance Procedures.

The Code will apply alongside any other statutory information and consultation obligations which may be relevant to the situation. That might include, for example, any collective bargaining arrangements with trade unions, the TUPE Regulations, and/or the collective redundancy regime.

Although a collective redundancy process is required if there is a proposal to dismiss 20 or more employees at one establishment, the new Code will apply regardless of the number of employees involved in the “fire and rehire” process.  

However, the Code will not apply where there is a genuine redundancy situation for the purposes of the definition in the Employment Rights Act 1996 (in other words, a particular role is no longer needed, or there is reduced need for a particular type of work, and the employee(s) are not being replaced).   

In general, it is advisable for employers to consult with employees and seek their agreement before making changes to their employment contracts. This can help to ensure that the changes are made fairly and that employees are kept informed and involved in the process.

We would suggest that an employer should look to use a variation of terms when there is a legitimate business need to make changes to an employee’s terms and conditions of employment. 

In order to utilise Variation of Terms employers must ensure that the employee’s contract allows for changes: Some employment contracts contain a flexibility clause that allows the employer to make changes to the terms and conditions of employment. However, the clause must be clearly written and the changes must be reasonable.

Some common reasons why an employer might consider varying an employment contract include:

1. Changes in business needs: Such as changes to the company’s products or services, or changes to the company’s organisational structure.
2. Changes in job duties: in response to changes in the role or in response to changes in the company’s needs.
3. Changes in working hours: In response to changes in the company’s needs or accommodating the employee’s personal circumstances.
4. Changes to pay and benefits: As a result of changes in the company’s financial situation or to comply with legal requirements.

Benefits of Variation of Terms

Improved flexibility: Allowing employers to respond quickly to changing business needs or to accommodate the changing needs of individual employees. This can help to improve the flexibility of the workforce and to ensure that the business is able to operate efficiently and effectively.

Reduced costs: Changes to an employee’s terms and conditions of employment can sometimes result in cost savings for the employer, such as through reduced hours of work or changes to pay and benefits.

Improved employee retention: By being willing to negotiate and vary employment terms, employers can show their employees that they value and care about them. This can help to improve employee retention, reduce staff turnover, and improve employee engagement and morale.

Increased job satisfaction: Variation of terms can help employees to negotiate changes to their working conditions that better suit their individual needs and preferences. This can help to improve job satisfaction, employee motivation, and productivity.

Fire and Rehire Support With HR:4UK

In conclusion, it is critical for employers to follow important steps when making any changes to an employee’s contract. Employers should consult with the employee, provide a clear explanation of the proposed changes, communicate these effectively and ensure that notice is given in sufficient time. This will help to protect all parties involved: both employers and employees, thus helping foster and maintain fair and healthy workplace relationships.

If you are considering making changes to your employee’s contracts, but are unsure of the best way forward, speak to our advisors who can help guide you through the process to ensure you get it right.