On 18 July 2024, the UK's first Statutory Code of Practice on dismissal and re-engagement came into effect for England, Wales and Scotland. However, Labour has committed to reforming the fire and rehire practice by implementing a stronger code of practice, which the government has described as "inadequate". The new code will provide more robust guidance for employers and aim to ensure that fire and rehire is used only as a last resort.
Key changes for employers
Employers will need to familiarise themselves with the new code and its potential consequences.
There will be a greater emphasis on consultation and dialogue with employees, which must be carried out ‘for as long as reasonably possible’.
Seek advice from ACAS before discussing fire-and-rehire practices with your employees.
Businesses must consider alternatives to fire and rehire more thoroughly.
The process for implementing contractual changes will likely become more stringent.
If an employer unreasonably fails to comply with the code, their compensation liability may increase by up to 25%. Conversely, an employee's compensation can be reduced by 25% if they fail to comply.
Impact on operational flexibility
The proposed changes may limit employers' ability to quickly adapt to changing business needs through contractual modifications. This could potentially impact operational flexibility in several ways:
Longer implementation timelines: The requirement for more extensive consultation and consideration of alternatives may extend the time needed to make changes.
Increased costs: The process of negotiating changes and potentially offering enhanced packages to secure agreement may lead to higher costs for businesses.
Reduced agility: Companies may find it more challenging to swiftly respond to market changes or economic pressures.
Additional considerations
The proposal includes plans to reform the law to provide effective remedies against abuse of fire and rehire practices.
The government acknowledges that businesses may need to restructure to remain viable in some circumstances but emphasises the need for proper processes based on dialogue and common understanding.
The changes may lead to an increase in employment tribunal claims, as the time limit for bringing claims is proposed to be extended from three to six months.
Further reading
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