Rules around dismissal and re-engagement came into effect in July 2024. Sometimes known as ‘fire and rehire’, the practice of forcibly changing terms and conditions by dismissing an employee and re-engaging them on the new terms has been a staple for employers during restructures for years.
From January 20th 2025, a 25% uplift in tribunal compensation will become available to employees who have a successful claim for a breach of the code of Practice, or a breach of collective consultation obligations.
Recap of the rules surrounding ‘fire and rehire’:
The statutory Code of Practice sets out principles it expects employers to follow when dismissing and re-engaging employees. It applies where an employer is considering making changes and envisages that, if the employee does not agree to some or all of the changes, they might dismiss and re-engage them. It also applies regardless of the number of employees affected by the proposed change. The Code aims to ensure that employees are not simply threatened with dismissal as a way to obtain agreement to the changes.
- The Code encourages a greater level of consultation and seeks to ensure that employees are treated fairly during the process.
- Meaningful discussions should, therefore, take place and the parties should engage with each other openly and in good faith. Employers should be clear about its objectives and the nature of the proposals.
- The prospect of dismissal should not be raised unreasonably early, and the Code requires employers to contact ACAS (the Advisory, Conciliation and Arbitration Service) before doing so. Employers should make a note of this call so that they can show that they have made contact.
- The Code requires employers to share as much information as possible so that the employees and their representatives, where applicable, are able to understand the reasons for the proposed changes.
Before reaching a decision, employers should consider the objectives that they are trying to achieve, whether there are any negative consequences and any risk of discrimination. They should also consider whether there are any reasonable alternative ways of achieving the objectives. If an agreement is reached, at any stage of the process, then this should be confirmed in writing within one month.
If an agreement cannot be reached and an employer decides to dismiss and re-engage on the new terms, the employer should give as much notice as possible and provide practical support if it can. The new terms should also be set out in writing within one month. A failure to follow the Code does not in itself mean that an employer will be liable to proceedings.
However, if an employee does bring a claim of unfair dismissal at employment tribunal, then the tribunal will consider whether or not the employer acted in line with the Code.
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