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What you need to know about the new ‘fire and rehire’ code

What is fire and rehire?

Dismissal and reengagement, commonly known as ‘fire and rehire’, is a practice employers adopt when making changes to terms and conditions of employment.

Employees who refuse to agree to proposed new terms are dismissed and re-engaged on different, often less generous, terms.
Firing and rehiring is not unlawful, but the tactic is controversial and might expose employers to statutory (including unfair dismissal) and contractual claims. Employers may also have collective consultation obligations if large numbers of employees are involved.

Lawfully terminating employment and reengaging on new terms when employers need to act quickly for commercial reasons is
different to intimidating employees, often low paid, to pressurise them to sign up to less favourable terms. Either way, the practice
can seem aggressive.

In November 2021, Acas then published non-statutory guidance on the practice, saying that firing and rehiring should only be used as a last resort. In addition to opening employers up to legal claims and industrial action, Acas advises that the practice of firing and rehiring can damage staff morale, trust, productivity and working relations.

The government says the code will detail how businesses must hold fair, transparent and meaningful consultations on proposed changes to employment terms. It will also include some practical steps employers should follow. Tribunals will need to take the code into account when dealing with unfair dismissal claims; they will be able to apply an uplift of up to 25 per cent of an employee’s compensation where an employer unreasonably fails to follow it.

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