IoD consultation response Draft Code of Practice on dismissal and re-engagement

The IoD has responded to the government’s call for views on a draft statutory Code of Practice that sets out employers’ responsibilities when seeking to change employment terms and conditions.

Context of this consultation:

The Code sets out employers’ responsibilities when seeking to change employment terms and conditions, if there is the prospect of dismissal and re-engagement. It requires employers to consult staff and explore alternative options, without using the threat of dismissal to pressure employees to agree new terms.

The IoD’s view:

The development of a Code is welcome in providing employers with clarity regarding their responsibilities when considering changes to terms and conditions where there is the prospect of dismissal and re-engagement. Qualitative survey feedback from IoD members was clear that threats of dismissal and re-engagement should not be used as a negotiation tactic, and that dismissal and re-engagement should only be considered as an absolute last resort due to risks that such an approach presents in terms of industrial relations and organisational reputation.

The draft Code constitutes a useful and reasonable means of balancing worker protections and labour market flexibility. There are aspects of the Code, however, which would benefit from additional clarity:

  • While it makes sense for the Code to apply regardless of the number of employees affected, or potentially affected, by the proposed changes, this constitutes a particularly marked change for SMEs, given that employers’ existing legal obligations in respect of collective consultation under the Trade Union & Labour Relations (Consolidation) Act 1992 only apply where an employer is proposing to dismiss and re-engage 20 or more employees. The Code therefore risks creating a confusing environment for SMEs trying to understand their obligations, given that aspects of it do not align with existing legislation. Government should therefore ensure that the available information and guidance on dismissal and re-engagement specifically caters to the needs of SMEs, which are more likely to struggle with the costs of compliance.
  • Some employers may seek additional clarity as to the steps they would need to take to evidence that the factors described have been taken into consideration. For example, phrases such as, “the employer should take some time to reassess its analysis…” are ambiguous and may be interpreted differently by employers and employees. Clarity on timescales is particularly important given the time-sensitive nature of many of the situations likely to lead employers to use dismissal and re-engagement as a last resort.
  • Further clarity on the point at which the Code comes into effect would also be helpful. The Code refers to it coming into force when employers consider making changes to employment contracts which, if not accepted by employees, may lead to dismissal and re-engagement, but more precise guidance or examples of when that is envisaged to apply would reduce ambiguity for employers.
  • Furthermore, while the Code refers to the potential for tribunals to ‘decrease any award by up to 25%, where it is the employee who has unreasonably failed to comply’, the Code itself makes very limited references to the behaviours with which employees will be expected to comply. For the Code to engender improvements in industrial relations, it would benefit from being more explicit about the ways in which employees can contribute to a meaningful conversation.
  • Section 11 states that collective agreements are considered, for the purposes of the Code, as encompassed in the terms ‘employment contract’ or ‘terms and conditions’. When coupled with Section 1’s statement that employment contracts – thus including collective agreements, which are not currently legally enforceable – ‘are legally binding agreements’, the Code risks creating ambiguity as an employer could breach the Code but not the law. This risk would be mitigated by removing the reference to collective agreements in Section 11.

You can read the IoD’s response in full here.

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