Fire and Rehire

Expected October 2026

Fire and rehire – or dismissal and re-engagement, to use the more technical term – is another significant area of change.

This is where an employer dismisses an employee and offers them new employment on different terms and conditions, rather than terminating the contract full stop. It is currently used, usually as a last resort, to make changes to employees’ terms and conditions that an employer deems necessary but which employees have not been willing to agree voluntarily during a process of consultation.

There is already the risk of ordinary unfair dismissal claims for employers engaging in dismissal and re-engagement exercises, but it is possible to defend those claims if an employer can show that they have acted reasonably, for example by  consulting appropriately with employees, considering alternatives and making compromises where appropriate.

The practice has received widespread negative press coverage in recent years for example, Tesco, British Airways and British Gas.

The last government issued a statutory code of practice setting out the steps an employer should take when engaging in a dismissal and re-engagement process which is already in force. The existing code of practice  gives tribunals the power to increase compensation by up to 25% in any successful claims if an employer has unreasonably failed to follow the code. In the current government’s view, this code of practice is inadequate – and it pledged to abolish the practice of fire and re-hire as a manifesto commitment.

The draft legislation says that an employee will “only” be automatically unfairly dismissed where the reason, or principal reason, for the dismissal is that the employer sought to make a "restricted variation" and the employee did not agree.

Restricted variations include any changes that reduce pay, alter performance-based pay measures, affect pensions, change working hours or shifts or reduce time off. 

This broadly covers  any changes concerning important things like pay, hours or holidays – and the Secretary of State will be able to add to these through regulations.

If an employer is facing severe financial difficulties, and the changes are being made to address those difficulties, then any dismissals will not  be automatically unfair under these changes, but the normal unfair dismissal rules will apply.

This change may have a bigger impact that expected, as it will make it nearly impossible for an employer to have a conversation with an employee about what could be seen as a relatively minor change to terms and conditions, for example, say an employer wanted to change the start and end time of an employee by 15 mins per day (so starting earlier and finishing earlier), but with no overall impact on the number of hours that the employee works per week and therefore no impact on pay.  If there is a chance the employee may not agree to that change the employer will not want to have the conversation, as they will not be able to then dismiss as it will be automatically unfair.

Therefore, to make changes like this, the employer may need to consider a redundancy process, but will not be able to rehire.