The government is taking "strong action" against unscrupulous employers that use the controversial practice of ‘fire and rehire’, it has announced.

Last year, P&O Ferries deliberately sought to evade the law by sacking 786 seafarers without due consultation. Having made no efforts to inform the Business Secretary at the time, the company failed to follow best practice. As a result, Grant Shapps, as Transport Secretary at the time, introduced a nine-point plan including primary legislation to tackle these issues.

The resulting planned statutory code of practice aims to protect employees and crack down on employers that use controversial dismissal tactics. The code, subject to a consultation, will make it explicitly clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms, and that they should have honest and open-minded discussions with their employees and representatives.

‘Fire and rehire’ refers to when an employer fires an employee and offers them a new contract on new, often less-favourable terms. The new statutory code of practice will set out employers’ responsibilities when seeking to change contractual terms and conditions of employment, including that businesses must consult with employees in a fair and transparent way when proposing changes to their employment terms.

Once in force, courts and Employment Tribunals will be able to take the code into account when considering relevant cases, including unfair dismissal. They will have the power to apply a 25% uplift to an employee’s compensation in certain circumstances if an employer is found to not comply with the statutory code.

Business Secretary Grant Shapps said:

“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. We are determined to do all we can to protect and enhance workers’ rights across the country.”

Maritime Minister Baroness Vere said:

“We remain committed to protecting seafarers and championing the importance of their welfare. This new code goes one step further to doing just that, helping us ensure employees are treated fairly and employers hold meaningful consultations on any proposed changes to employment terms. This forms part of our nine-point plan to reform and improve seafarer welfare and close down any legal loopholes that allow employers to avoid paying them – irrespective of flag or nationality.”

Employers should be deterred from using this controversial tactic and must ensure they do not mistreat employees. If they do, they risk poor relations with their employees, and will open themselves up to the risk of legal claims.

The government asked the Advisory, Conciliation and Arbitration Service (ACAS) to produce guidance for employers, which was published in 2021. This new Code of Practice shows the government is going a step further to protect workers across the country, while balancing that with the flexibility that businesses require.

A consultation will run for 12 weeks to invite views from the public and other interested groups on a new statutory code for employers seeking to change employee terms and conditions.

Individuals or groups with an interest can take part in the consultation: Draft Code of Practice on dismissal and re-engagement.