Employers who fail to adhere to the code of practice for dismissal and re-engagement, or “fire and rehire”, could face higher compensation levels as of next month.
The new code allows tribunals to increase compensation by 25 percent if an employer fails to comply with it in a reasonable manner.
When the code was introduced in July of this year, it did not include any protective awards as part of the penalties that could be imposed for non-compliance.
Tribunals have traditionally made protective awards when employers fail to comply with their collective consultation obligations, in situations of redundancy involving at least 20 employees. These awards can be up to 90 days gross salary.
The list of claims that are eligible for the increase has been expanded by a statutory amendment to include failure to comply with the requirements for collective consultation.
This order will come into effect on 20 January 2025. Employers planning to make large-scale layoffs will have to take into account the financial risk of an increase of 25% in any compensation awarded by a tribunal for a violation of the code as well as the obligations of collective consultation.
The code was created after employers like P&O Ferries were criticized for using “fire and rehire” to reduce wages and lower costs.
The government promised to eliminate such practices after the July elections. A consultation was closed last week regarding the strengthening of the existing code that had been introduced by the former administration.
In the consultation, the government asked for opinions on increasing the maximum period of the protective award when employers do not comply with the collective redundancy regulations and adding interim relief for collective redundancies or unfair dismissals if there is a fire and rehire scenario.
