25 May 2022

Danny Done, managing director of Portfolio Payroll, provides an overview of the new statutory code of practice  recently announced by the government

On 29 March 2022, the government announced plans to introduce a new statutory code of practice for employers using fire and rehire tactics. A Parliamentary vote was held during the previous week on banning fire-rehire practices completely, driven by the Labour Party. This was in response to the widely publicised largescale redundancies of P&O Ferries staff. However, the vote lacked support from the Conservative Party and failed by 251 (against banning) to 188 (for banning), so new laws won’t be implemented at this stage to prohibit the use of such tactics. However, it’s hoped the new code will act as a deterrent for employers acting unreasonably and that it will safeguard workers’ rights.

The use of fire-rehire practices has been widely criticised as a means of renegotiating contractual terms and conditions, with many arguing the pandemic was used as a smokescreen to diminish workers’ terms and conditions in an unacceptable way. As a result, in November 2021, the Advisory, Conciliation, and Arbitration Service (ACAS) published new guidance at the request of the government. This confirmed employers should only consider dismissing and offering to rehire someone on new terms as a last resort, and only where changes are critical and voluntary agreement isn’t possible. Before doing so, they must have made all reasonable attempts to reach an agreement through full consultation with affected staff members and their representatives in a genuine and meaningful way.

The Department of Business, Energy and Industrial Strategy is now going one step further to introduce a statutory code of practice on dismissal and re-engagement, under Section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). The code will include practical steps employers should follow in these situations, such as:

  • the minimum consultation period and number of meetings they should hold

  • the information needed to communicate with employees and their representatives

  • the notice requirements for meetings and those to observe before introducing changes

  • the grounds which will be considered as reasonable for implementing changes in the first place.

When undertaking such processes, it’s important to adhere to fundamental principles, including:

  • ensuring there’s a robust business case in place, which outlines the changes and explains why they’re necessary

  • considering the impact this may have on affected employees and analysing whether there are any alternative ways to reach the same goal

  • evaluating the number of employees that will be affected by the change and adhering to collective consultation rules and any processes outlined within trade union agreements

  • reviewing alternative approaches by looking at what compromises employees have offered and evaluating whether they’ve been given adequate consideration

  • providing clear and reasonable grounds for rejecting any alternatives based on strong, factual evidence

  • showing empathy, compassion and understanding throughout the process, to ensure employees feel they’re fully valued and supported

  • treating all employees equally and consistently, and not making changes based on any protected characteristic an employee holds.

Changing terms and conditions can be a lengthy process but employers who take the time to do so properly will reap the rewards eventually. Effective consultation can help maintain good workplace relations, as it allows staff to understand the reasons behind proposed changes and provides them with an opportunity to share their views. This can help to build trust and find a solution that works for everyone. Tensions can arise if employees feel they haven’t had the opportunity to inform decisions around proposals or don’t support the changes. This can result in staff feeling less committed, impacting an organisation’s performance and increasing the risk of tribunal claims or industrial action.

When claims are raised to the employment tribunal, the judge will refer to statutory codes when deciding the level of award an employee is entitled to. The most common statutory code is, arguably, the ACAS code of practice on disciplinary and grievance procedures. However, the new fire-rehire code will lay new consideration for employment tribunals to analyse. This means an employer may face paying out up to 25% more in compensation for not following the process set out in the code. It’s hoped this will act as a further deterrent to employers, to prevent them from abusing the fire-rehire process and from treating employees unfairly.

The government will be consulting on the draft code later this year and will bring it into force as soon as Parliamentary time allows. For now, businesses can continue to utilise fire-rehire approaches where necessary, but it’s important they understand the need to properly consult with affected staff members, and they know the risks to the organisation if they don’t. In coming months, tribunals will likely be stricter when evaluating fire-rehire situations and be less lenient when considering the process employers followed to enforce changes to contractual terms. 


Featured in the June 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.