Mar 2026 – Employment Rights Act: how will the fire and rehire provisions apply in practice?
The Employment Rights Act 2025 seeks to restrict the controversial practice of “fire and rehire”. A recently launched government consultation now gives us a glimpse into the potential scope of the government’s plans.
The original proposal for the ban on fire and rehire included in the Employment Rights Bill covered changes to any contractual term without employee agreement.
As the Employment Rights Bill progressed through parliament, this ban was relaxed a little and will now only preclude dismissals arising from changes to core contractual terms.
What is fire and rehire?
Fire and rehire is shorthand for an employer dismissing an employee and then re-employing them under a new contract. The term generally also refers to a “fire and replace” scenario: where the employee is dismissed and replaced by somebody else.
The fire and rehire practice is currently lawful if employers can establish a fair reason for dismissal (usually falling into the category of some other substantial reason).
For many employers, this strategy would only be used as a final attempt to push through changes to an employee’s contract, especially where the employee has refused to agree to the change by consent, following a reasonable consultation process.
In practice, most employers will look to agree the change with their employees. Enforcing a change can be problematic for employee relations and so careful communication, negotiation and incentivisation generally brings a much better outcome than simply enforcing the change.
Even though fire and rehire is seldom resorted to in practice, the changes to the rules are still relevant because they impact how easily you will be able to update and modernise contractual terms in the future. They shift more power towards employees.
What will be changing?
Dismissals to impose certain key contractual terms (known as “restricted variations”) will be automatically unfair if the reason for the dismissal is (a) the employee not agreeing to these changes, or (b) so that the employer can employ another person on varied terms to carry out substantially the same role.
No qualifying service will be required to bring an automatic unfair dismissal claims on these grounds and (from 1 January 2027) employees would be able to claim uncapped compensation or (in some cases) reinstatement or reengagement on their original terms.
What is a restricted variation?
Restricted variations will include changes to an employee’s contractual:
- pay (more on this below)
- required number of working hours
- pension
- shift times and length (more on this below)
- time off rights, and
- other changes to be defined in regulations.
Imposing a new flexibility clause on an existing employee, allowing the employer to make one of the above changes unilaterally, will also be restricted.
Changes to non-contractual elements will still be allowed so you can, for example, withdraw a fully discretionary scheme allowing time off as long as it’s not contractual.
What changes to pay and shift patterns would be restricted?
Expenses and benefits
The consultation indicates that the government’s current preferred option is to exclude all expenses and benefits in kind. This would mean a dismissal to effect a change relating to these terms would not be automatically unfair – albeit the employer would still need a fair reason to dismiss.
Example: A large technology supplier experiences an increase in client demand to have virtual sales meetings, significantly reducing the need for Sales Managers to visit clients on site. With profit margins also under pressure, the business looks to make savings before considering redundancies. They propose to remove the private use of company vehicles for all Sales Managers, which is currently a contractual benefit.
The Sales Managers do not agree to the change – many view their contractual right to a high-end company car as a perk to the job and an important part of their overall remuneration package. The business explores alternatives, such as potentially introducing an electric vehicle scheme, but the Sales Managers are still not happy. After a full consultation process, the business eventually dismisses the Sales Managers, immediately offering them re-employment on revised terms.
Because the underlying change relates to a contractual benefit, if the government proceeds with their preferred option, the dismissals would not be automatically unfair. The Sales Managers could still bring an ordinary unfair dismissal claim but the employer would be able to argue that it had a fair reason to dismiss (which we consider below).
The other option being considered by the government, is to carve out of the exclusion share schemes, travel expenses and accommodation expenses, meaning they would remain restricted variations. The government is seeking views on what expenses and benefits (if any) should be restricted but it could include changes to, for example, reduce the limit for business class travel or remove any accommodation provided as part of a role.
Shift patterns
The other area the government is seeking views on is whether changes to contractual shift patterns should be restricted. The government recognises that a business may legitimately need to adapt to customer demand or changing circumstances, affecting shift patterns. On the other hand, even small changes to shift times can have a big impact on employees.
The government has indicated that the preferred option is to restrict shift changes from day to night working, and weekday to weekend working will be restricted.
Example: A manufacturing company operate a five day rota, Monday to Friday. The company gains a significant new client and needs to introduce a 7-day rota for all operatives to keep up with demand. One of the operatives has young children and resists the proposed change, arguing that she would be unable to continue in the role if it required weekend working. The employer offers an inflated rate of pay for weekend working, but the employee is still unhappy.
If the government were to proceed with their preferred option, this change to weekend working would be a restricted variation, meaning any dismissal would be automatically unfair.
What about changes that are not automatically restricted?
If an employee is dismissed and re-engaged to impose a contractual change which is not a restricted variation, then the dismissal will not be automatically unfair.
This includes changes to contractual terms the government considers “non-core”, such as location and job role.
Whether such a dismissal is fair or not will still be judged according to the usual unfair dismissal tests. However, the Act requires tribunals to take account of the reason for the variation, any individual or collective consultation and anything the employee was offered in return for the change. So, it is possible that changes that would have been lawful in the past will now be deemed unlawful.
Example: As part of an internal reorganisation, an advertising agency is looking to streamline their front of house and office support functions. The receptionist team will now need to take on additional office coordination duties. Their title will change from Receptionist to Office Co-ordinators but their pay, hours and other contractual terms will remain the same. After a short consultation period, the Receptionists all object to the changes and are eventually dismissed.
Changes to job title and duties are not a restricted variation. However, a Tribunal is now required to take into account the reason for the change and the fact that nothing was offered to the Receptionists in return for their agreement. The quality of consultation would also be taken into account, including whether the agency genuinely engaged with the objections and explored alternatives. The dismissals could still therefore be unfair.
When will the changes happen?
Although originally expected later this year, the restrictions on fire and rehire will now take effect in January 2027. The enhanced protections for ordinary unfair dismissal claims (for changes to non-core terms), will also take effect at the same time.
How can employers prepare?
There are a number of steps employers can take now to prepare:
- Audit your contracts: understand what the contracts say about shift patterns and if a set working pattern is referred to. It will also be important to understand what contractual expenses and benefits clauses exist.
- Consider working practices: consider what shift patterns operate in practice and whether these still suit your business needs.
- Use fire and rehire (even more) cautiously: even though the changes won’t be implemented until 2027, any use of fire and rehire is controversial in the current climate. With these changes on the near horizon, reputational risks are even greater.
- Focus on other methods to effect change: to demonstrate that fire/rehire is the ‘last resort’ we think more emphasis will be placed by the Tribunals on demonstrating this. So, evidencing that you have tried to effect the change by negotiating with or incentivising the employee will increasingly be important. As such, avoid making assumptions that employees will not agree to the change and jumping straight to the dismissal/re-engagement process.
If you have any specific questions you would like advice on or if you would like information about what is discussed in this article, then please contact: Abi.Frederick@lewissilkin.com of Lewis Silkin LLP.