The code of practice on dismissal and re-engagement (the Code) came into effect on 18 July 2024. The Code impacts all employers who are considering making changes to terms and conditions and where dismissal and re-engagement is envisaged. It is a statutory code of practice and compliance with it can be taken into account in a variety of tribunal claims. The Code does not ban dismissal and re-engagement. Instead, it sets out a step-by-step guide for employers to follow and essentially reflects good employee relations practice.
What is dismissal and re-engagement?
Dismissal and re-engagement (or "fire and rehire") is the practice of forcing through changes to employees' terms and conditions of employment by terminating employment and offering re-engagement on inferior terms. This practice has had some bad press, often creating legal and reputational risks for the employer, being harmful to employees’ interests as well as damaging the employer’s relationships with its employees, potentially leading to disengagement and industrial conflict.
What are employer’s obligations under the Code?
The Code imposes obligations that require an employer to inform and consult with affected employees regardless of the number of employees involved. It applies when an employer is considering making changes to term and conditions of employment and envisages that, if the employees or their representatives do not agree to some or all of the changes, it might opt for dismissal and re-engagement. The Code also states that employers should contact ACAS before raising the prospect of dismissal and re-engagement.
Have a listen to the S&B People Podcast for more discussion on the obligations set out in the Code.
What are the impacts of the Code?
The Code does not give rise to any standalone claims, but it is admissible in evidence in employment tribunal proceedings. For cases involving dismissal and re-engagement which occurred after 18 July 2024, where the Code applied, and the employer has unreasonably failed to comply with it, the tribunal can increase awards by up to 25%. This will apply to awards for unfair dismissal claims, discrimination claims and a number of other claims. From 20 January 2025, this will also include claims for protective awards, which the tribunal award where there has been a failure to collectively consult where the employer proposes to dismiss 20 or more employees as redundant within a period of 90 days or less. Protective awards are currently up to 90 days gross actual pay (no cap) per employee. The effect of this change will be that in a claim for a protective award, where the tribunal holds that the Code applied and the employer unreasonably failed to comply with it, that protective award can be increased by up to 25%. Given that a protective award is one of the most valuable claims in the tribunal, this is a significant increase.
Further changes
The Employment Rights Bill, currently working its way through the legislative processes, includes some further changes which go much further than the Code, making dismissal and re-engagement automatically unfair in most circumstances. These changes are not likely to come into effect until 2026.
The government also proposes to increase the level of protective awards, either to 180 days or by removing the cap on the protective award entirely.
Charlotte Gunn