Fire and rehire policies are changing: What do employers need to know?

10 March 2026

The rules governing how employers fire and rehire employees are set to become stricter under the Employment Rights Act 2025.

These reforms will make it harder for businesses to dismiss employees in order to impose new contractual terms.

Employers will need to rely more heavily on consultation and careful contractual drafting to stay compliant.

Although the reforms are not expected to take effect until January 2027, employers need to understand how they affect working arrangements and employment terms.

What is fire and rehire?

Fire and rehire is where an employer dismisses an employee and then offers to re-employ them on new contractual terms.

It can also refer to fire and replace, where an employee is dismissed and replaced by someone else on different terms.

Under current UK law, the practice is not illegal.

Employers may be able to rely on a fair reason for dismissal, often falling within the category of ‘some other substantial reason’.

However, it is generally considered a last resort and used only after attempts to agree changes with employees have failed.

What is changing to fire and rehire under the Employment Rights Act?

Under the Employment Rights Act, dismissing an employee because they refuse to accept certain contractual changes will be automatically unfair.

Employees will also not need a minimum period of service to bring this type of claim.

These protections will apply where the employers attempt to impose changes to restricted variations.

These include changes to:

• Pay or other sums payable to the employee
• Pension arrangements
• Working hours
• Time of rights
• Certain shift patterns

The legislation aims to prevent employers from introducing new contractual clauses that would allow them to make these changes unilaterally.

However, an exception will exist where a business can demonstrate that the changes are necessary to prevent serious financial difficulties.

The Government is currently consulting on the restricted variations, particularly in relation to employee benefits, expenses and shift patterns, until 1 April 2026.

What do the fire and rehire changes mean for employers?

From April 2027, employers may face automatic unfair dismissal claims and increased scrutiny from employment tribunals.

Employers will need to approach any contractual changes and dismissals with greater care and ensure they have followed proper consultation processes.

How can employers prepare for the fire and rehire reforms?

Although the new restrictions are some time away, you still need to prepare your processes and team.

Employers should:

• Assess contractual terms – Review existing terms, particularly those relating to pay, pensions, hours and leave, to spot areas that may fall within restricted variations.
• Strengthen consultation processes – Have meaningful and early consultations with employees before proposing contractual changes.
• Document your reasoning – Keep clear records of the reasons for any proposed changes.
• Train HR teams and managers – Ensure those responsible for managing employment changes understand the legal risks and can manage discussions appropriately.
• Consider alternatives – Explore negotiated changes or incentives before considering dismissal.
• Monitor updates – Stay informed on further guidance as the Government continues to consult on restricted variations.

How can we help you prepare for the fire and rehire reforms?

The Employment Rights Act reforms will take effect over the next year and employers must be aware of their new obligations.

Our professional team can review your employment contracts and spot any areas where contractual changes may create legal risks.

We can assess whether your dismissal processes are legal and fair and ensure your reasonings are valid, so you are not at risk of claims.

With early legal advice, you can understand the reforms that will affect you and protect your business and employees’ rights.

For further advice or support on the fire and rehire changes, contact our Employment Law team today.