UNISON members at Sandwell leisure centre protesting fire and rehire in 2021
New financial penalties have come into place for employers who fail to use collective consultation requirements when they dismiss and re-engage (commonly known as ‘fire and rehire’) or dismiss as redundant 20 or more employees.
Dismissal and re-engagement is a hostile employment practice where an employer seeks to terminate workers’ existing contracts and rehire them under new, often lower terms and conditions.
Where there is a proposal to dismiss 20 or more employees, the employer must comply with a legal duty to ‘inform and consult’ with trade unions, under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. Such dismissals happen in redundancy situations, but fire and rehire is also captured under these laws.
Employers who fail to follow the law risk having to pay ‘protective awards’ to affected employees. Protective awards are compensation payments of up to 90 days’ gross pay (uncapped).
Since July 2024, employers must also follow the statutory Code of Practice on Dismissal and Re-engagement, issued by the business and trade secretary under section 203 of the 1992 act. This sets out a recommended procedure to follow when making changes to the terms and conditions of an employee’s contract, which includes initiating ‘meaningful’ collective consultation. If employers fail to follow this code, tribunals have the power to increase the protective awards that employers must pay out by up to 25%.
However, the 2024 code of practice omitted the need for collective consultation from the list of claims to which tribunals could award uplifts. As of 20 January 2025, this has now been rectified by the Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024.
In short, this means that employers face more financial risks if they try to use fire and rehire without consulting with trade unions in accordance with the code of practice.
When assessing the financial risk associated with a failure to comply with collective consultation obligations in a redundancy or fire and rehire situation, employers will now no longer be able to use ’90 days’ gross pay’ per employee as their worst-case scenario. Now, they will have to factor in increased costs of up to 25% of this figure.
UNISON has long criticised the use of fire and rehire and hopes that this new measure will act as a deterrent to employers considering this practice.
