Navigating the New Fire and Re-Hire Rules: What Employers Need to Know

What Is Fire and Re-Hire?

Fire and re-hire is when an employer terminates an employee’s contract and offers them re-employment, often on less favourable contractual terms. Employers often use the process during organisational restructuring, cost-cutting measures, or when making changes to pay, working hours, or job roles. This practice has faced significant criticism for undermining job security and workforce trust — most notably during P&O Ferries’ controversial dismissal of 800 employees without consultation. In response, a new statutory Code of Practice on dismissal and re-engagement (known as “fire and re-hire”) was introduced in July 2024, aiming to protect workers and promote fairness.

Overview of the Fire and Re-Hire Rules

The statutory Code of Practice, outlines specific requirements for employers to follow which are:

• Advance Notification: Employers must inform employees in advance about any proposed changes.
• Consultation: Employers must engage in meaningful discussions to explore alternatives before implementing changes.
• Transparency and Compliance: Employers must adhere to fair and transparent processes to safeguard against unfair dismissals and foster trust in the workplace.

The Code of Practice sets out that fire and rehire should only be used as a last resort.

What Are the Effects of the Statutory Code of Practice?

For any cases after 18 July 2024, where the Code applied and the employer failed to comply with its requirements, the Tribunal are entitled to order an increase in compensation of 25%. As from 20 January 2025, Tribunals will also be able to order an uplift on a protective award of 25%. Protective awards are granted where an employer has failed to collectively consult with employees when they are proposing to make 20 or more employees redundant within a 90-day period. The protective award is significant as it applies to every employee affected and a Tribunal can award up to 90 days gross pay. Therefore, the ability for Tribunal’s to increase a protective award further is significant.

Advice for Employers: How to Navigate the Fire and Re-Hire Process

For employers, the new rules mean stricter consultation standards and higher financial risks for non-compliance. Following these steps can help ensure you meet the Code of Practice requirements:

• Share information transparently – Provide employees and their representatives with relevant details about the proposed changes as early as possible. This transparency enables employees to understand the rationale behind the employer’s decisions.
• Conduct meaningful consultations – Engage in open, honest discussions. The consultation should allow adequate time to explore alternatives and address concerns.
• Document and justify decisions – Clearly communicate any agreed-upon changes in writing. This step ensures employees fully understand the new terms and reduces the risk of misunderstandings.
• Avoid premature threats of dismissal – Do not mention dismissal too early in the process or use it as leverage. Only bring up dismissal after thorough consultation and consideration.
• Re-examine proposals – If initial consultations do not lead to an agreement, reassess your proposals, considering feedback from employees or their representatives.
• Avoid imposing unilateral terms – Refrain from imposing new terms without agreement, as this can constitute a breach of contract and harm industrial relations.

It’s important to note that while the Code of Practice provides a framework for best practices, it does not impose legal obligations. However, adherence to this framework is advisable to mitigate legal risks and maintain positive industrial relations as well as avoiding a potential uplift in compensation.

How We Can Help with Fire and Re-Hire Legal Advice

If you have any questions on the regulations around fire and re-hiring or its implications for employers or employees, please contact Nicola O’Dwyer – Nicola.odwyer@ibblaw.co.uk.