There are many reasons why an employer may wish to change the terms of the employment contract. Where the change is unfavourable, especially if it involves changes to pay or benefits, the employee(s) may not give their consent to the proposed change. If negotiation and consultation does not resolve the issue, as a last resort the employer can terminate the existing contract and offer a new one (a practice commonly known as ‘fire and rehire’). Following public controversy regarding the practice of fire and rehire in recent years, the government last year promised to introduce a new statutory code of practice. 

The Department for Business, Energy and Industrial Strategy (BEIS) has now begun a public consultation on a new draft statutory code of practice on dismissal and re-engagement. The consultation confirms that the purpose of issuing a statutory code of practice is to ensure that an employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with trade unions, other employee representatives or individual employees in good faith, with an open mind, and does not use threats of dismissal to put undue pressure on employees to accept new terms, instead of seeking to find an agreed solution.

The draft code of practice sets out, in detail, the core steps that an employer wishing to change contractual terms should take if fire and rehire is a possibility. The draft code is divided into eight sections covering: 

A. The purpose, scope and legal status of the code
B. The role of trade unions and employee representatives acting on behalf of individual employees when an employer is considering making changes to contracts
C. The factors for an employer to consider once it envisages that dismissals might be needed, to help assess whether the proposed contractual changes really are necessary
D. The importance of the employer sharing appropriate information at an early stage and encourages the employer to consider what categories of information have been shared, and what further information could be provided
E. The employer’s responsibilities for carrying out a full and thorough consultation process conducted in good faith
F. The considerations for the employer if the changes to the terms are agreed
G. The employer’s responsibilities if it decides to unilaterally impose any new terms
H. The employer’s responsibilities if it decides to dismiss employees and either re-engage them, or engage new employees or workers to perform the same roles on the altered terms

BEIS has stated that the statutory code of practice will be brought into force when parliamentary time allows. As this will be a statutory code of practice, where relevant employment tribunals will be required to take it into account in any proceedings and may adjust compensation by up to 25% to reflect unreasonable non-compliance.

The consultation, which closes at 11:45pm on 18 April 2023, can be found here.