Employers could face 25% uplift on compensation for breaching Statutory Code of Practice on Dismissal and Re-engagement

In 2021, the government asked Acas to investigate the use of so-called "fire and rehire", which is the practice of forcing through changes to employees' terms and conditions of employment by terminating employment and offering re-engagement on inferior terms. Alternatively, it may involve the threat of dismissal to achieve the same ends, or applying pressure on employees to agree to worse terms and conditions.

The government has confirmed that a new statutory Code of Practice on Dismissal and Re-engagement (Code) will be brought into force by July 2024, subject to Parliamentary approval.

Critics of the new Code suggest that the 25% uplift to compensation, which will be awarded where an employer has unreasonably failed to comply with the Code, is not likely to act as a sufficient deterrent to employers intent on dismissing and re-engaging staff.

The 25% uplift for failure to comply with the code will apply to a claim where an employer has unreasonably failed to comply. Where it is the employee who has unreasonably failed to comply with a relevant code, the compensation can be reduced by up to 25%.

The draft Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024 also adds a claim for a protective award to the list of jurisdictions to which the uplift applies. This addition could be significant. Where an employer proposes to dismiss and re-engage more than 20 employees within a period of 90 days or less there are certain legal obligations to collectively consult with which they must comply. A failure to do so could now lead to both a protective award for each employee and an uplift of up to 25% in respect of any breach of the Code.

The Labour Party is proposing to abolish "fire and re-hire" altogether if it wins the forthcoming General Election.

The Order is scheduled to come into force on 18 July 2024.