New UK legislation is poised to curtail the controversial practice of ‘Fire & Rehire,’ where employers terminate their contracts and offer reemployment with revised terms. Although it is often portrayed as an exploitative practice in the media, some employers use this tactic as a last-resort to manage operational pressures. This era could soon be gone.
As the Employment Rights Bill advances through Parliament, it is expected that sweeping reforms will come into effect as soon as October 2025. This legislation, once enacted will almost completely eliminate employers’ ability to change contracts by firing and rehiring employees. The law recognizes that employers must be flexible in their employment relationships, but it also sets strict limits on what they can do without employee consent.
It is important that HR professionals review their organisation’s policies and practices, or else they may face severe legal and reputational implications down the road. Staying compliant will require a proactive approach. This includes re-evaluating contracts, policies and contingency plans.
Shift in the legal landscape
Historically, Fire & Rehire was used to implement change when employee agreements could not be reached. This model is now reversed by the new legal framework. The new law will classify dismissing an employee for refusing to accept a new offer as unfair dismissal. This is a major improvement in worker protection.
This change has a particular impact on sectors such as hospitality and cleaning. Employers that have adjusted their working hours and shift patterns to meet client demands may not be able to do this anymore unless they have obtained the explicit consent of staff.
A new Code of Practice will also outline the best practices for managing contract modifications. The Code is not legally binding, but it will be considered in court proceedings and those who do not follow its recommendations could face penalties. To protect themselves from increased liability, HR teams must embed the Code in their internal protocols.
When an exception applies
There will be some narrowly defined situations where dismissal or re-engagement is still legal. Employers can only take this action if:
- It is essential that contractual changes be made to avoid or mitigate serious financial difficulties which threaten the viability and future of the company.
- There was no alternative reasonable at the time.
This is not an exemption for operational convenience. It is intended to be used in scenarios where other options fail, such as when there is an insolvency threat. To avoid legal liability, employers who wish to claim this exemption must have convincing evidence, detailed records and robust consultation.
The risks of breaking the rules
Some employers might be tempted by the temptation to use contract clauses to impose change or to pass off Fire & Rehire policies as redundancies. These workarounds are not without risk.
Tribunals are unlikely to be receptive of any attempts to portray contract changes as redundancies without a genuine elimination of roles. Legal scrutiny will also be unlikely to support unilaterally relying on clauses of variation, particularly when they are detrimental to employees. The new legislative trend favors mutual agreement rather than imposed changes.
A high-risk alternative is to replace dismissed employees with agency workers. It is not just ethically questionable, but it could also lead to a breach of TUPE or industrial action. HR professionals must be aware of the financial and reputational consequences of these tactics.
These approaches, even if they are not illegal, may violate the spirit of a new Code of Practice and increase the likelihood of higher compensation awards by tribunals.
A non-compliance comes at a high price. Employers may also face punitive damage awards in addition to unfair dismissal cases, especially when large-scale dismissals are made without proper consultation. Reputational damage can be very costly, affecting recruitment and retention at a time of high pressure on the workforce.
Prepare for the Change
The time is critical. Employers should evaluate urgently whether future changes are needed to core terms, such as hours, locations, or shift structures. Act now while the legal system still allows greater flexibility.
Start by conducting a thorough audit of all employment contracts. Be sure to pay attention to the clauses that allow for changes and update them in accordance with any new legal requirements. To ensure that any changes to the contract will be valid under the new laws, it is important to seek legal advice.
HR teams need to establish solid consultation frameworks that go beyond contracts. Transparent dialogue and prompt responses with employees are essential to a lawful practice. When changes are needed, incentives and voluntary agreements will be safer than unilateral imposition.
Organisations should look at ways to add flexibility to workforce planning, without resorting solely on dismissal. This could include a more collaborative shift schedule, voluntary contract modifications, or rotating staffing models.
Finaly, HR staff as well as line managers need to receive targeted training regarding the Employment Rights Bill. To stay compliant and minimise disruption, it is important to be aware, prepared, and have a consultative attitude.
A new era of compliance for employers
The almost total restriction on Fire & Rehire marks a significant shift in employment law. Although some employers may see the changes as restrictive, they also represent an opportunity to create fairer and more transparent employment relations that can withstand scrutiny and foster trust.
The companies that move early, review their practices and invest in employee involvement will not only stay compliant, but will also be better equipped to adapt to future challenges of the workforce with confidence.
Ends.
James Twine, Partner and Head Business Services at Wolferstans is an employment law specialist and education specialist. He provides support to schools and businesses in England and Wales on all aspects of employment laws.
What is the future of ‘Fire & Rehire? HR News published the first article on what HR professionals should know about this upcoming ban.
