Fire and Rehire: What Employers Need to Know About
the New Code of Practice
The UK government has now published a revised draft Code of Practice on Dismissal and Re-engagement, following its 2023 consultation. Once approved by Parliament, this Code will set a clear legal framework for how employers must conduct themselves when seeking to change terms and conditions through the controversial practice of dismissal and re-engagement, commonly referred to as “fire and rehire.”
The revised Code is a direct response to increased scrutiny over high-profile cases and growing concern about employers using this mechanism without adequate consultation. It emphasises that dismissal and re-engagement must be a last resort—not a shortcut to avoid genuine dialogue with employees.
What Is Fire and Rehire?
“Fire and rehire” refers to situations where an employer seeks to change an employee’s terms and conditions, but where agreement cannot be reached, and the employer opts to dismiss the employee and offer re-engagement on new (often less favourable) terms.
While not unlawful in itself, the process can trigger legal risks, reputational damage, and industrial unrest—particularly where it is used hastily or without a proper consultation process.
Key Features of the Revised Draft Code
The Code is not law, but it will be statutory guidance. That means it will be taken into account by tribunals, which can increase or decrease compensation awards by up to 25% depending on whether parties have complied with it.
Here’s what employers need to know:
1. Applies Broadly
The Code applies to all employers, regardless of the number of employees affected or the reason for proposed changes. It does not apply to dismissals solely for redundancy.
2. Emphasis on Meaningful Consultation
Employers are expected to:
Start consultation early and share relevant information promptly.
Be transparent about the reasons for proposed changes.
Genuinely consider alternatives suggested by employees or representatives.
3. Contact ACAS Early
Before raising the possibility of dismissal and re-engagement, employers should contact ACAS for guidance. This underlines the importance of external oversight and best practice.
4. Threats of Dismissal Must Be Genuine
Employers must not use the prospect of dismissal as a negotiating tactic unless it is genuinely being considered. Doing so could be seen as coercive and may undermine the consultation process.
5. Review and Reassess
If agreement can’t be reached, employers must re-examine their proposals in light of employee feedback. This includes:
Assessing the negative impact on employees.
Considering whether alternative solutions exist.
Reviewing whether the changes are still necessary.
6. Phased Implementation & Support
Where changes go ahead, employers should consider:
Giving as much notice as reasonably possible.
Offering practical support (e.g., relocation help, flexible notice, or career counselling).
Start with collaboration: Explore agreement first. Don’t lead with dismissal options.
Be clear and specific: Explain the business case for change and provide relevant documents early.
Treat people individually: Consider the real-world effects of proposed changes—on childcare, commuting, finances, etc.
Keep records: Document every step of the process to demonstrate reasonableness if challenged.
Reviewing the changes over time and mitigating any adverse impact.
Practical Tips for Employers
Start with collaboration: Explore agreement first. Don’t lead with dismissal options.
Be clear and specific: Explain the business case for change and provide relevant documents early.
Treat people individually: Consider the real-world effects of proposed changes—on childcare, commuting, finances, etc.
Keep records: Document every step of the process to demonstrate reasonableness if challenged.
FAQs: Fire and Rehire and the New Code
Q: Is fire and rehire now unlawful?
A: No. The practice remains lawful, but the Code introduces stricter expectations on how it should be used. Employers who fail to follow the Code could face higher tribunal awards.
Q: Does the Code apply if I’m only changing one employee’s contract?
A: Yes. The Code applies regardless of the number of employees affected.
Q: What if the business is in financial crisis and can’t consult for long?
A: The Code recognises that shorter consultations may be reasonable in crisis scenarios. However, employers must still act transparently and fairly.
Q: Do I have to follow the Code when making redundancies?
A: No. The Code only applies where dismissal is proposed to facilitate contractual change, not redundancy situations.
Q: Can I offer new terms immediately after dismissal?
A: Yes, but only after a thorough and meaningful consultation process has been completed and all alternatives have been explored.
Q: What happens if I ignore the Code?
A: While failure to follow the Code is not an offence in itself, tribunals can increase compensation by up to 25% for unreasonable non-compliance.
Final Thoughts
The revised Code of Practice signals a shift in how government expects employers to approach contractual changes. Fire and rehire is still a lawful route—but only if handled properly, transparently, and fairly. Employers should now treat the Code as part of their broader legal obligations when managing workforce changes.
If your business is planning contractual reforms or navigating employee consultation, our employment team can help ensure compliance with the new Code and protect your position throughout the process.