Grant Shapps introduces rules to crack down on controversial ‘fire and rehire’ tactics

The government will crack down on employers’ using controversial “fire and rehire” tactics to stop another P&O-style scandal from happening.

Fire and rehire, or “termination and re-engagement”, is the practice of dismissing employees with notice before offering to re-employ them immediately after termination, often on less generous terms. 

The practice was brought into focus following P&O Ferries’ decision to dismiss around 800 of their UK-based crew members by zoom call in March last year, replacing them with cheaper agency staff, without due consultation.

While fire and rehire is lawful in the UK, the move is widely condemned as it’s seen as intimidating to employees, pressuring them to sign up to less favourable terms in a short space of time for fear of losing their jobs.

The government have now published a draft code of practice to strengthen workers’ rights and crack down on unscrupulous employers that use controversial dismissal tactics.

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Courts are to be given power to apply a 25% uplift to an employee’s compensation in certain circumstances if an employer doesn’t follow the new Code.

Business Secretary Grant Shapps said fire and rehire should only be used as a “last resort”.

“Our new code will crack down on firms mistreating employees and set out how they should behave when changing an employee’s contract.

“Using fire and rehire as a negotiation tactic is a quick-fire way to damage your reputation as a business. Our new code will crack down on firms mistreating employees and set out how they should behave when changing an employee’s contract.”

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The code, which is subject to negotiation, falls short of an outright ban on the practice.

The TUC union warned that the new code doesn’t go far enough, dismissing it as “a reheated, repeated announcement”.

TUC General Secretary Paul Nowak said: “A statutory code of practice is not going to stop another P&O-style scandal from happening, and it won’t deter bad bosses from treating staff like disposable labour.

“If the Government really cared about workers’ rights it wouldn’t have abandoned its much-touted employment bill.”

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The Employment Bill, announced in the Queen’s speech in 2019, would have introduced protections against pregnancy discrimination, a default right to flexible working patterns, safeguards for zero-hours workers, and created a single enforcement body for employment rights to make sure abuses don’t go unnoticed between different regulators.

After being delayed for two years, the bill was left out of the Queen’s Speech in 2022.

Tim Tyndall, employment partner at Keystone Law, emphasised that HR teams should not see a major change in their day-to-day procedures, as it will only become relevant when considering contractual changes for employees as part of a reorganisation.

“Employers should be made aware that non-compliance with the code is likely to be viewed as evidencing unfair procedure and therefore, increasing the likelihood of a finding of unfair dismissal. There is also the danger of the 25% uplift to awards being applied in the event of a failure to comply. Legal advisors should advise HR teams to be more cautious," he said.

“Despite many businesses seeking to save money in the current economic crisis, they will have to be wary of taking shortcuts which expose them to legal risk and reputational damage.”