What are the new rules on fire and rehire?
From March 2027 (expected, subject to Parliament), dismissing an employee for refusing a change to core terms such as pay, hours, pensions, leave or certain shift patterns will be automatically unfair, unless the employer meets a narrow financial difficulties exemption. Dismissing employees to replace them with non-employees doing substantially the same work will also be automatically unfair in most cases.
Restricted variations
The Employment Rights Act 2025 calls the protected core terms restricted variations. They include:
- reducing or removing pay or other sums payable, or changing how output-based pay is measured
- changes to pensions
- changes to the number of hours an employee must work
- reductions in leave entitlement
- shift changes specified in regulations: the government plans to cover moves between day and night working and between weekday and weekend working
- a contract term letting the employer make any of these changes without agreement
The financial difficulties exemption
For a private employer, a dismissal will not be automatically unfair if it shows the change was to eliminate, prevent or significantly reduce or mitigate financial difficulties affecting, or likely soon to affect, its ability to carry on as a going concern, and that it could not reasonably have avoided the change. The test differs for public sector employers and local authorities. GOV.UK describes it as a high bar. Even then, the tribunal will still decide whether the dismissal was fair, including whether the employer consulted and what it offered in return.
Other contract changes
Changes to other terms, such as location or job role, are not automatically unfair, but tribunals must consider consultation and anything offered in exchange when judging fairness. Following consultation, the government plans regulations to exclude most expenses and benefits in kind from restricted variations, except certain travel and accommodation expenses and benefits, aiming for them to take effect alongside the protections in March 2027.
Until then the existing Code of Practice on dismissal and re-engagement applies, and a tribunal can increase compensation by up to 25% if an employer unreasonably fails to follow it. A revised code is out for consultation until 17 December 2026.
The law
“a variation of the number of hours which an employee is required to work…”
“in all the circumstances the employer could not reasonably have avoided the need to make the restricted variation…”
Sources
- Make Work Pay: fire and rehire – changes to expenses, benefits, and shift patterns · GOV.UK
- Make Work Pay: revised code of practice on dismissal and re-engagement · GOV.UK
- Factsheet: Fire and Rehire · GOV.UK
- Plan to Make Work Pay and Employment Rights Act: timeline update · GOV.UK
General information for employers in Great Britain, not legal advice. Check the official sources for your situation.
- Consultation on the revised code of practice on dismissal and re-engagement closes
- Fire and rehire protections expected to take effect
Future dates are expected dates and depend on Parliament.
What employers can do
- Identify any planned changes to pay, hours, pensions, leave or shift patterns
- Seek agreement through genuine consultation with employees, unions or representatives
- Record what you offer in return for any change
- If financial difficulty is the reason, document the evidence and the alternatives considered
- Follow the current Code of Practice on dismissal and re-engagement for any change before the new rules start
Related answers
- What are the rules on redundancy consultation? Employers should consult every affected employee before deciding on redundancies. If 20 or more redundancies are proposed at one establishment within 90 days, collective consultation with representatives must begin at least 30 days (45 days for 100 or more) before the first dismissal, and form HR1 must be submitted. Failure can lead to a protective award of up to 180 days' pay per employee.
- When does the unfair dismissal qualifying period change to six months? The qualifying period for ordinary unfair dismissal claims falls from two years to six months on 1 January 2027. The new rule applies wherever the effective date of termination is on or after 1 January 2027, even if notice was given earlier. The cap on unfair dismissal compensatory awards is removed from the same date.
- What is changing under the Employment Rights Act 2025, and when? The Employment Rights Act 2025 is being brought in by phases. Day-one paternity and parental leave, sick pay changes and six-month tribunal time limits already apply. Next come the stronger harassment duties on 30 October 2026, a six-month unfair dismissal qualifying period from 1 January 2027 and fire and rehire protections in March 2027. Future dates remain subject to Parliament.