You’ve probably heard the expression “fire and rehire” in the news over the past few years. It’s basically a term coined to refer to a situation where a company dismisses employees and then re-employs them straight away on less favourable terms. It’s a risky approach for employers to take. And it’s an approach that’s being tightened up on through a new statutory code of practice.
The new code of practice, relating to what’s more formally referred to as dismissal and re-engagement, was laid before Parliament at the end of May. It takes effect from the 18th July 2024. Its focus is on ensuring any employer who wants to make contractual changes always consults its employees properly and treats them as fairly as possible. Firing and rehiring is still an option. But only if every other avenue has been explored first and there are no viable alternatives left.
Why now?
Over the past few years (and particularly during the pandemic) there were quite a few companies accused of unjustly using firing and rehiring tactics. Instead of following correct processes to make changes, employees were basically presented with a stark choice. That choice being ‘accept new terms or lose your job’. The former Conservative Government responded by creating a formal statutory code of practice to restrict the use of this approach.
What’s in the new statutory code of practice?
The new code of practice applies to all organisations. It doesn’t matter what their size is or how many employees are affected. It sets out the procedure employers must follow if they want to change any terms and conditions. Threatening to fire and rehire early in the process to get the outcome an employer wants isn’t acceptable. Instead, employers must carry out a full, transparent and meaningful consultation with the appropriate representatives. And the code emphasises that it must be done in good faith.
But what happens if you genuinely can’t reach an agreement?
The code acknowledges that despite the best intentions of everyone involved in the consultation, there will still be instances where employees and/or their representatives will not accept the changes. That will likely lead towards a scenario where an employer’s left considering dismissal and re-engagement.
But extreme care must be taken if you find yourself in this situation. Before progressing down this route, you must contact Acas for an impartial discussion about the steps taken so far and for their advice about your intention to proceed with firing and rehiring. You will need to identify a potentially fair reason for dismissal. And you must follow the fair dismissal procedure for your particular set of circumstances. Existing legal obligations remain so if, for example, you’re looking at dismissing then rehiring 20 or more employees, you must continue to comply with the specific legal requirements relating to that situation.
The code also encourages employers to consider whether they can go beyond contractual notice periods and give more time to help employees accommodate the changes e.g. if new childcare arrangements need to be made. Employers are also encouraged to consider whether there are any other kinds of practical support, like counselling, they can make available.
The consequences of getting it wrong
There’s no avoiding the fact that if you’ve reached the point of considering firing and rehiring, you’re in a risky place as an employer. It’s an absolute last resort because it could potentially go wrong in several ways.
For starters, it’s almost inevitable that it’s going to cause bad feelings between you and your employees. It will very likely erode trust and harm working relationships – not exactly a recipe for future success. It might even lead to industrial action. There could be a knock-on effect further down the line with people deciding to leave. Your reputation as an employer could be tarnished too, making future recruitment harder.
You might also end up facing legal claims. They could include constructive dismissal, unfair dismissal and possibly discrimination too particularly if it affects some employees more than others. Compliance with the new statutory code of practice will be taken into account by courts and employment tribunals when they’re reaching their decision. If they conclude there’s been an unreasonable failure by your business to comply with the code in any way, it could lead to an uplift in compensation awarded by up to 25%.
Approach firing and rehiring with caution
If you ever find yourself reaching the point where you’re contemplating firing and rehiring employees, be very careful. Make sure you’ve followed the statutory code, considered all the risks and exhausted every other possibility. And be aware the new Labour Government has indicated an intention to strengthen this code even further.
If you need to make changes to employee contracts and are unsure about how to do it, talk to us. We offer a range of HR services designed to give maximum flexibility with the support we provide to you. Please don’t hesitate to get in touch with us to find out more.
