Fire & Re-hire Code: ACAS Response

Following the completion of the government’s consultation on the draft Code of Practice and Re-engagement on 18 April 2023, a review was undertaken by ACAS, providing their thoughts on how this may affect both employers and employees.

Objectives for the Code of Practice

The government proposes that the Code will apply where both of the following conditions apply:

• The employer wants to make changes to the employee’s contract of employment; and
• If the employee does not agree to these changes, the employer considers that it may dismiss them and offer them re-employment, or recruit new workers to undertake the role on the new terms.

The main objective of the Code of Practice is for employers to try and find suitable alternative employment before dismissing and re-engaging an employee on new terms. It recommends that any consultation in respect of altering an employee’s terms should be undertaken in “good faith” and with an “open mind”.

Whilst the government does acknowledge that firing and rehiring is an effective and valid option in certain situations, it also notes that an employer should not be using the threat of dismissal to put undue pressure on an employee to accept new terms.

ACAS opinions

ACAS is, of course, very welcoming of the idea that all reasonable steps in exploring alternatives will be taken, and that, when a consultation does take place, it will be done so with an open mind and in good faith. These ideas are ones which are reflected in ACAS’ non-statutory guidance on changing employment contracts.

However, ACAS does raise several concerns about the Code. Initially, there are concerns about the beginning and the end of the process, for example, if an employer raises the idea of dismissal too early, this could have a corrosive effect on negotiations around the matter. In contrast, if they reach the end of the consultation, and no result has been achieved, they do not want the Code to have the effect of putting employers off the idea of firing and re-hiring if this turns out to be the best option.

Additionally, the draft Code’s length and complexity may be inaccessible to some, especially smaller businesses.

Finally, ACAS believe that there needs to be greater understanding around the expectations and consequences of not following the Code. Without this, employers are left to simply consider the options, rather than following and implementing them.

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