The New Code of Good Practice on Dismissal (2025): Key Changes and Practical Implications

The Department of Employment and Labour has implemented the new Code of Good Practice: Dismissal, effective 4 September 2025. This Code replaces previous versions dealing with both dismissal and retrenchment. While the changes are not drastic, they introduce meaningful refinements that align the Code with recent case law and offer clearer guidance to employers. Organisations should review and update their internal procedures to ensure compliance.

Recognition of Small Businesses

A key development is the Code’s recognition of the realities faced by small businesses, many of which operate without formal HR structures. Smaller employers may follow simpler, less formal procedures, provided they remain substantively and procedurally fair. The emphasis is on fairness over technical formality, supporting a practical and flexible approach.

Defining Dismissal and Balancing Interests

The Code clarifies that dismissal includes termination with or without notice, non-renewal of fixed-term contracts, refusal to reinstate employees after maternity leave, or making the workplace intolerable. It balances employee protection with the employer’s right to expect acceptable conduct and performance, reaffirming that dismissal must always have both a fair reason and a fair procedure.

Dismissal for Misconduct

Before dismissing an employee for misconduct, employers must assess the context. Factors such as the seriousness of the offence, the nature of the rule breached, the employee’s record, and the impact on the employment relationship must be considered. Dismissal remains a last resort, reserved for situations where the trust relationship has irreparably broken down. Proportionality remains central.

Probation and Suitability for Employment

The Code broadens the purpose of probation, recognising that it is not only a period to assess work performance but also an employee’s overall suitability. Employers may consider compatibility, behaviour, cultural fit, and workplace integration, not just technical competence. This gives employers more flexibility when deciding whether a new employee is suited to long-term employment.

Unsatisfactory Performance After Probation

In line with case law, the Code notes that a prior warning is not always required before dismissing an employee for poor performance after probation. This is particularly relevant for senior or managerial employees who should be able to evaluate their own performance, and for specialised roles where poor performance may cause serious operational or financial harm. A uniform approach to performance management is not always appropriate.

Expanded Scope of Incapacity

The definition of incapacity has been widened to include not only illness or injury, but also imprisonment and incompatibility, where relational difficulties or behaviour undermine effective working relationships. This creates a more coherent framework for dismissals based on personal circumstances that affect functionality.

Retrenchment

Although the retrenchment provisions are largely unchanged, the Code clarifies what constitutes legitimate operational requirements and outlines essential procedural steps. A new checklist guides what must be included in a notice of intended retrenchment and ensures fairness during consultation.

Unprotected Strikes

The Code now reflects updated principles on unprotected strikes, emphasising that employers must still consult with the relevant trade union, or where none exists, with employee representatives or strike leaders. Meaningful engagement remains essential, even during unlawful industrial action.

Practical Implications

The Code introduces flexibility in disciplinary processes. Employers may conduct informal investigations for minor infractions and use more formal procedures for serious matters. When imposing sanctions, employers must assess fairness, consistency, proportionality, and consider whether progressive discipline may be effective before dismissal.

Conclusion

While the new Code does not overhaul the law on dismissal, it brings valuable clarity and aligns with modern labour jurisprudence. It reflects a realistic understanding of workplace relationships, recognising that fairness does not always depend on rigid formality. Employers should update their disciplinary, incapacity, and retrenchment procedures and ensure managers receive proper training to apply the new Code consistently.