New Code of Practice for Fire and Rehire

Employers sometimes enforce contractual amendments by using a “fire and rehire” strategy—terminating employment and offering to rehire staff on new terms. A Statutory Code of Practice regulating this practice will come into force later this year. In this briefing, we explain the key requirements of the new Code and what it means for employers.

For more details, read our related article: Government Publishes Final Statutory Code of Practice Governing Fire and Rehire Practices.

Background

In 2021, the Government asked Acas to investigate fire and rehire practices. In November 2021, Acas released guidance advising that fire and rehire should be used as a last resort. You can read our Acas briefing here.

Following the P&O Ferries scandal in March 2022—where 800 employees were dismissed without consultation—the Government announced plans for a new Statutory Code of Practice. A consultation on the draft Code ran from January to April 2023. On 19 February 2024, the Government published its response and a revised draft, which will be laid before Parliament and, if approved, come into force in Summer 2024.

Key Requirements of the New Statutory Code

Purpose and Scope

The Code emphasizes that fire and rehire is a practice to be used only as a last resort. Its purpose is to ensure employers:

• Explore all reasonable alternatives.
• Engage in meaningful consultation to reach an agreed outcome.

The Code applies when an employer:

• Considers making changes—express or implied—to employees’ contracts.
• Envisages dismissal and re-engagement if changes are not agreed.

It covers any number of employees and any justification for change, except where dismissal would be for redundancy only.

Information-Sharing and Consultation

Where a recognised trade union exists, the employer must consult it. Otherwise, consultation may involve:

• An existing body of employee representatives.
• Employee-elected representatives for the proposals.
• Each affected employee individually.

All employees—including those on sick or maternity leave—should be included. Employers must also comply with other obligations under collective redundancy or TUPE law.

Information to Be Provided

Employers should share as much information as reasonably possible to help employees understand, ask questions, and propose alternatives. This may include:

• Details of the proposed changes (new terms).
• Who will be affected.
• Business reasons for the changes.
• Timetable and rationale.
• Other options considered.
• Proposed next steps.

While the Code recommends providing information in writing “as early as reasonably possible,” no fixed timeline is prescribed.

Consultation Process

Consultation must be open, genuine, and not a tick-box exercise. Employers should:

• Be clear about objectives.
• Consider alternative proposals.
• Consult for “as long as reasonably possible.”

Raising the Prospect of Dismissal and Re-engagement

If dismissal and rehire may be necessary, employers should:

• Be clear, but not raise the prospect unreasonably early.
• Contact Acas for advice before mentioning fire and rehire.

Re-examination of Proposals

If no agreement is reached, employers should:

• Re-examine proposals in light of feedback.
• Consider impacts on protected groups.
• Explore reasonable alternative methods to achieve objectives.

If Changes Are Agreed

When agreement is reached:

• Communicate changes in writing (good practice).
• Update the statement of particulars within one month if statutory terms change.
• Issue a new contract or side letter to amend the original contract.

Unilateral Imposition of New Terms

Imposing changes without agreement may breach contract unless a clause explicitly allows it. Employers should:

• Check the scope of any unilateral amendment clause.
• Be aware of legal limitations and potential claims.

Employees working under protest should notify the employer in writing and specify disputed terms.

Dismissal and Re-engagement

After thorough consultation, an employer may still opt to dismiss and rehire. The Code requires:

• Fairness in dismissal (for employees with requisite service).
• Proper notice of dismissal.
• Written offer of new terms and updated particulars.
• Re-engagement “as soon as reasonably possible.”

Employers should also consider:

• Phased implementation of changes.
• Practical support (e.g., relocation assistance).
• Fixed-point review of changes.
• Collecting feedback as employees adapt.
• Mitigating negative impacts.

Consequences of Breaching the Code

A breach does not automatically give rise to a claim, but tribunals may:

• Increase compensation by up to 25% for unreasonable non-compliance by the employer.
• Decrease compensation by up to 25% for unreasonable non-compliance by the employee.

Relevant claims include unfair dismissal, breach of contract, discrimination, detriment, and unauthorised deductions from wages.

Next Steps for Employers

Employers should:

• Review the new Code and note its commencement date.
• Prepare a template consultation letter covering all required information.
• Plan appropriate timelines: two weeks for individual cases; align with collective redundancy periods (30–45 days) for larger groups.
• Maintain detailed records of each consultation stage to demonstrate compliance and avoid compensation uplifts.