Dismissal and re-engagement, also known as ‘fire and rehire’, refers to when an employer fires an employee and offers them a new contract on new, often less favourable terms.

A new statutory code of practice has now been published making clear how employers must behave in this area.

Business minister Kevin Hollinrake said: “Our new code will crack down on employers mistreating employees and sets out how they should behave when changing an employee’s contract.

“This announcement shows we are taking action to tackle fire and re-hire practices by balancing protections for workers with business flexibility”.

“In future the courts, and employment tribunals, will take the code into account when considering relevant cases. This will include on unfair dismissal claims where the employer should have followed the code.

“Employment tribunals will have the power to apply an uplift of up to 25 percent of an employee’s compensation if an employer unreasonably fails to comply with the code.

“The new code clarifies how employers should behave when seeking to change employees’ terms and conditions, aiming to ensure employees are properly consulted and treated fairly.

“Employers will now also need to explore alternatives to dismissal and re-engagement and have meaningful discussions with employees or trade unions to reach an agreed outcome.

“The code makes it clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms. They should also not raise the prospect of dismissal unreasonably early or threaten dismissal where it is not envisaged.”