Changing employment terms through dismissal and re-engagement, commonly referred to as "fire and rehire," has long been a contentious practice. Now, as part of the Employment Rights Bill, the UK government is introducing much stricter rules aimed at curbing its misuse and ensuring employers follow a fair and transparent process.
If you’re a business owner, HR lead or in-house legal adviser, this article outlines what’s changing, when it’s likely to take effect, and what you need to do to stay compliant. You’ll learn how the ACAS Code is being strengthened, what risks you face if you get it wrong, and how to prepare for the shift.
If your business is considering contractual changes or a restructure, our employment law solicitors can help you navigate the process with confidence and minimise your legal risk.
Contents:
What is fire and rehire, and why is it under scrutiny?
The UK government is introducing new rules designed to tighten up the controversial practice known as “fire and rehire”. This refers to situations where an employer dismisses employees and offers them re-employment on new, often less favourable terms, typically when a contractual change cannot be agreed voluntarily.
How the Employment Rights Bill is changing the rules
When the Employment Rights Bill was first introduced, it proposed that if an employee was dismissed for refusing to agree to a variation in their contract of employment, the dismissal would be automatically unfair unless the employer could show that the changes were essential to prevent serious financial collapse of the business and a strict consultation process had been followed.
The government has now proposed amendments to soften these provisions. A dismissal in these circumstances will only be automatically unfair when the proposed variation in a “restricted variation” which includes changes relating to an employee’s pay, hours and holidays. Employers will be precluded from imposing flexibility clauses on existing employees except in very limited circumstances. Employers should review the flexibility clauses in their contracts ahead of the Employment Rights Bill coming into force which in October 2026.
A further amendment extends the fire and rehire ban to cover the replacement of employees with self-employed contractors, workers who are not employees or agency workers if the replacement is going to do substantially the same work. This is what happened in the P&O ferries case which is often cited as an example of the sort of practice the government wanted to outlaw.
While fire and rehire will remain legal for non-restricted changes, employers must follow robust and fair procedures prior to dismissal including carrying out meaningful consultation with affected staff. The aim is to protect workers from misuse of fire and rehire while still allowing employers some flexibility.
The ACAS Code on Fire and Rehire
This ACAS Code force in July 2024 and employers must follow it in any dismissal and reengagement process. A failure to do so can lead to an uplift in Employment Tribunal awards of up to 25%.
The Code places a strong emphasis on meaningful consultation and communication. Employers will be expected to engage with employees early, explain the business rationale for the proposed changes, and explore all reasonable alternatives before moving to fire and rehire.
The Code emphasises that fire and rehire should be a last resort for employers.
What employers must do before dismissing and re-engaging
For employers, the message is clear: once the Employment Rights Bill comes into force, fire and rehire processes need to be managed extremely carefully and within the parameters of the law. If your business has used this tactic in the past, perhaps during COVID-19 or in response to rising operational costs, it will be vital to reassess your policies and practices. Poorly handled or undocumented consultation processes could expose your business to legal challenge. Equally, making decisions based solely on financial considerations, without exploring less drastic options, is likely to breach the ACAS Code and may lead to findings of unfair dismissal.
Beyond the legal risks, there’s also the question of culture and reputation. Businesses that misuse fire and rehire risk damaging employee trust, morale, and retention, not to mention the potential harm to their public image.
Steps employers should take now to prepare
To prepare for the changes, employers should act now. That means reviewing your internal processes for managing contract changes, ensuring your HR and leadership teams understand the importance of consultation, and keeping detailed records of all discussions and decisions. Seeking specialist legal advice at the outset can help you manage change more effectively and reduce the risk of tribunal claims.
These reforms reflect a broader shift in employment law, away from command-and-control approaches and toward greater transparency, engagement, and accountability. While change is sometimes necessary, how that change is delivered matters more than ever.
Our employment law solicitors can help you navigate the new rules with confidence, reviewing your approach, supporting consultations, and ensuring legal compliance every step of the way.
