On 24 January 2023 the government launched a consultation seeking feedback on its draft statutory Code of Practice on Dismissal and Re-engagement (sometimes known as “fire and rehire”). The consultation remains open until 18 April 2023. The draft code does not apply to redundancy situations.

It is proposed that the code will apply where an employer wants to make changes to its employees’ contracts of employment and envisages that, if the employees do not agree to those changes, it might dismiss them on notice and offer them re-employment on new terms or engage new employees to perform the relevant roles on the new terms.

The government asked ACAS to look into “firing and rehiring” and in November 2021 ACAS published advice on “Making changes to employment contracts – employer responsibilities”. The draft code follows on from ACAS’ concern about the prevalence of “firing and re-hiring” during the pandemic and also the well-publicised dismissals made by P&O Ferries without due consultation.

The draft code does not ban the concept of “firing and rehiring” and it therefore remains a lawful strategy when seeking to change terms and conditions of employment. What the draft code does make clear is that this approach should only be used as a last resort. An employer needs to take all reasonable steps to explore alternatives to dismissal and carry out consultation in good faith with employees/employee representatives/trade unions. If an employer is not contemplating dismissal, the draft code makes it clear that it should never use the threat of dismissal as a way of getting employees to agree to the changes.

How far-reaching is the draft code? Not very, in that it sets out guidance which many employers already adopt as part of good employee relations practice. A significant change is that, if the code applies to a tribunal claim, an employment tribunal can increase/decrease an award by up to 25% if there has been unreasonable failure to follow the code.