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What the UK’s new fire and rehire rules could mean for businesses and employees

P&O Ferries used the controversial fire and rehire tactic in 2022.
P&O Ferries used the controversial fire and rehire tactic in 2022.

The UK Government has announced new measures around the use of fire and rehire practices after high-profile companies, including P&O Ferries, sparked outrage with their use of the tactic.

A new code of practice was published yesterday, setting out guidance on the use of the tactic following a 12-week consultation.

The new code, which is subject to parliamentary approval, would see employment tribunals have the power to apply an uplift of up to 25 per cent of a person’s compensation through any unreasonable lack of compliance.

The Department for Business and Trade, which has drawn up the code, said employers should explore alternatives to dismissal and have meaningful discussions with employees or trade unions to reach an agreed outcome.

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What has the government said?

Business Minister Kevin Hollinrake:

Our new Code will crack down on employers mistreating employees and sets out how they should behave when changing an employee’s contract.

This announcement shows we are taking action to tackle fire and re-hire practices by balancing protections for workers with business flexibility.

What would the new code mean for employers and staff?

Kate Palmer, employment services director at HR, employment law, and health and safety consultancy firm Peninsula, said the rules are not expected to be introduced until later this year if approved by Parliament.

She said: “Under these new rules, employers will have to abide by specific instructions introduced by the government that outline the expected steps employers need to take when dismissing an employee with the intent to re-engage – commonly known as fire and rehire.

“The new rules are due to be introduced in the late summer however we won’t know final details until the code is published.

“The premise of these new measures, if introduced, is to encourage employers to explore alternatives rather than opting for fire and rehire.

“We expect there to be stricter rules on employers threatening dismissal to encourage employees to take up alternative positions within the company – usually on less favourable terms for the employee.

“There will be steps employers have to take in order to fire and rehire employees, and those who don’t comply could face financial consequences.

“The code is now being considered by Parliament and is expected to come into force later in the summer.

“Once it is in force, if an employer doesn’t comply and a claim is brought the award could be increased by up to 25 per cent.”

What have the critics said?

The proposed code has not been met by universal approval across the board.

Following the announcement, trade union Unite said: “The idea that a ‘code of conduct’ is going to stop employers like P&O from doing this is just a bad joke”.

General secretary of the TUC union organisation, Paul Nowak added: “This code lacks bite and is not going to deter bad employers like P&O from treating staff like disposable labour.

“We need far more robust legislation to protect people at work.

“One in 10 were threatened with fire and rehire during the pandemic – tinkering around the edges is not going to cut it.”