Employment Rights Act: Fire and Rehire
Fire and rehire has been under the microscope for a while. Under the Employment Rights Act, the government is moving to severely restrict its use.
For many employers, this is a significant shift in how contractual changes can be managed.
What’s changing
The proposed change to the law will mean that where employees are dismissed for refusing to agree to changes to their terms and conditions, those dismissals will be treated as automatically unfair.
There will be only a very narrow exception. Employers would need to show clear evidence of serious financial difficulty, to the point that the business could not continue as a going concern without changing contractual terms.
In short: “commercial preference” won’t cut it. The bar will be high.
What this means for your business
If your organisation has relied on, or anticipated relying on, fire and rehire to:
change working patterns
reduce costs
amend pay or benefits
restructure roles
… you will need to rethink your approach.
Even where changes feel necessary, the legal risk of getting this wrong will be significant once the new rules are in force.
What applies right now
Since 18 July 2024, the Code of Practice on Dismissal and Re-engagement has been in place and remains effective until further notice.
This means:
Employers are expected to consult properly and explore alternatives
Failure to comply with the Code can lead to a 25 per cent uplift in tribunal awards where an employer has acted unreasonably
So even before the Employment Rights Act changes fully land, the exposure is already there.
What you should be doing now
This is one area where early preparation really matters.
Review how you currently approach contractual change
Pressure-test whether proposed changes are genuinely necessary
Strengthen consultation processes and documentation
Explore alternatives before dismissal is even considered
Keep a close eye on consultations and guidance as this develops
Most importantly, involve HR early. This is not one to handle reactively or in isolation.
Fire and rehire isn’t disappearing overnight, but the room for manoeuvre is getting much smaller. Businesses that plan properly will protect themselves. Those that don’t may find the cost of getting it wrong is far higher than the change they were trying to make.