The government has officially launched a new statutory Code of Practice designed to restrict the controversial practice of 'fire and rehire', where employers dismiss staff and then re-engage them on new contracts with less favourable terms. Announced by the Department for Business and Trade, the Code outlines clear expectations for employers, emphasising the need for genuine consultation and exploration of alternatives before resorting to such measures.
Under the new Code, employers will be required to engage in meaningful and transparent consultations with employees and their representatives when considering changes to terms and conditions. It stipulates that 'fire and rehire' should only be used as a last resort, after all other options have been exhausted. The Code also states that employers must provide employees with full information about proposed changes, allow ample time for consideration, and genuinely seek to reach an agreement.
Crucially, employment tribunals will be empowered to increase compensation for employees by up to 25% if an employer is found to have unreasonably failed to comply with the Code. This provision aims to act as a significant deterrent, encouraging employers to adhere to the guidelines and treat staff fairly. The Code builds upon recommendations made by the Advisory, Conciliation and Arbitration Service (Acas) and has undergone extensive public consultation.
Business groups have expressed a mixed reaction. While acknowledging the need for clarity, some have voiced concerns about the potential impact on business flexibility and competitiveness, particularly for companies facing significant economic pressures or needing to adapt quickly to changing market conditions. They argue that the ability to amend contracts can be essential for survival and growth in certain circumstances.
Trade unions, however, have largely welcomed the introduction of the Code, viewing it as a step in the right direction to protect workers from exploitative practices. Yet, many union leaders, including the Trades Union Congress (TUC), argue that the Code does not go far enough and advocate for stronger legislative changes to ban 'fire and rehire' outright. They contend that a Code of Practice, while helpful, may not provide sufficient protection against determined employers.
The government maintains that the Code strikes a balance between protecting workers' rights and ensuring businesses retain the flexibility needed to operate effectively. It underscores the importance of good industrial relations and aims to foster a culture of open dialogue and negotiation between employers and employees.
Source: GOV.UK