New Code on 'Fire and Rehire' Practices

Employers will soon be required to follow a new Statutory Code of Practice governing the controversial tactic of “fire and rehire.” This measure aims to ensure fair, transparent, and meaningful consultations before any proposed changes to employment terms.

Background and Purpose

On 29 March, Labour Markets Minister Paul Scully announced the introduction of the new statutory code. It responds directly to high-profile cases—most notably P&O Ferries’ abrupt dismissal of 800 employees without prior consultation. The government has reiterated that using fire and rehire purely as a negotiation tool is completely unacceptable, and employers must treat employees with respect and fairness.

Defining “Fire and Rehire”

The term fire and rehire describes when an employer dismisses a worker and immediately re-engages them on less favourable terms. While rare, this practice carries significant legal and reputational risks, and the new code will clarify the proper process for any necessary contractual changes.

Key Provisions of the Statutory Code

• Mandatory Consultation: Employers must hold meaningful discussions with employees before dismissing and rehiring on new terms.
• Transparent Process: All proposed changes to terms and conditions must be clearly documented and explained.
• Tribunal Consideration: Employment Tribunals and courts will take the code into account when judging related cases, including unfair dismissal claims.
• Compensation Uplift: Failure to comply without reasonable excuse may trigger up to a 25% uplift in employee compensation.

Ministerial Statement

Labour Markets Minister Paul Scully commented:

“P&O Ferries’ actions were not a case of fire and rehire—just fire. However, the way the company acted in not consulting employees before taking extreme measures was appalling. That is why we are producing a new code to tighten the screw on unscrupulous employers, who must comply with tougher employment rules—including fire and rehire. We expect companies to treat their employees fairly, and while the vast majority comply with the law, today we are going further to stand up for workers against those that flagrantly disregard it.”

Implications for Employers

Employers considering contract changes—often driven by financial pressures—must regard this code as mandatory guidance. It builds on November 2021 Acas guidance, which already positioned fire and rehire as a last-resort option. Key takeaways include:

• Initiate full, transparent consultations well in advance of any dismissal decisions.
• Document all efforts to reach voluntary agreement.
• Be aware of potential legal claims, reputational damage, and employee-relations fallout.

Further Reading

Discover more about how this code will protect workers and enforce fair practices in our related article: New Statutory Code to Prevent Unscrupulous Employers Using Fire and Rehire Tactics.