In a significant move to bolster workers' rights and clamp down on controversial employment practices, the UK government has unveiled a powerful new statutory Code of Practice targeting the use of 'fire and rehire' tactics.
The new measures, set to be introduced in Parliament, will hand employment tribunals the authority to uplift compensation awarded to employees by up to 25% if an employer is found to have flouted the code and dismissed staff without proper consultation. This represents a major shift, giving legal teeth to what were previously just guidelines.
Closing a Contentious Loophole
The practice, formally known as 'dismissal and re-engagement', involves terminating an employee's contract and then immediately offering them a new one on less favourable terms, often with lower pay or reduced benefits. While not outright illegal, it has been a subject of intense scrutiny and public outrage, particularly after several high-profile cases.
Business Minister Kevin Hollinrake stated the code will provide a 'clear benchmark' for businesses, ensuring that 'fire and rehire' cannot be used as a negotiation tactic but only as a last resort after full and meaningful consultation has been exhausted.
Empowering Tribunals and Employees
The practical effect for businesses is substantial. An employment tribunal will now be compelled to consider whether an employer has complied with this statutory code in any relevant case. A failure to follow it will allow the tribunal to apply the 25% uplift to any compensation awarded to the employee.
This financial penalty serves as a strong deterrent, making it economically risky for companies to pursue this path without exploring all other alternatives first and engaging in good-faith discussions with their workforce or trade unions.
A Measured Response to Protect Jobs and Businesses
The government has been careful to frame the legislation as balanced. It aims to protect employees from unfair treatment while acknowledging that there may be rare, extreme circumstances where a business's survival depends on making changes to contracts.
The code, developed in consultation with ACAS (the Advisory, Conciliation and Arbitration Service), provides a structured framework for these difficult situations, emphasising transparency and exhaustive consultation over sudden, aggressive manoeuvres.
This landmark legislation marks the UK's strongest stance yet against a practice widely condemned by trade unions and MPs across the political spectrum, promising greater job security for millions of workers.
