The end of ‘fire and rehire’: will employers still be able to change employees’ terms?

April 29, 2025

The end of ‘fire and rehire’: will employers still be able to change employees’ terms?

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By Ramyar Hassan

The Employment Rights Bill (ERB) is likely to have a substantial impact on employers’ ability to make changes to their employees’ contracts of employment.

The ERB aims to bring an end to “fire and rehire” and change the tone of negotiations between employer and employee. Employment law expert, Ram, considers these changes and what the best practices are for employers going forward.

What is “fire and rehire”?

As a general rule, an employer is only entitled to change the terms of an employment contract (e.g. reduce an employee’s pay, amend their hours, or change one of their contractual benefits) if the employee agrees to the variation. Imposing a change without consent is a breach of contract and puts employers at risk of a constructive unfair dismissal claim.

However, if an employer is unable to vary the terms of the employee’s contract by agreement, one option that is currently available to them is to dismiss the employee and offer to rehire them on new terms. This practice is also known as dismissal and re-engagement, and leaves employees with the decision whether to accept the new contract on amended terms, or walk away and attempt to bring a claim for unfair dismissal.

Fire and rehire practices came under increased scrutiny and criticism following the P&O Ferries scandal in 2022. Following efforts to address it through a new Code of Practice, the UK Government is now making major changes.

What’s changed and how will the new rules work?

As a part of the reforms brought about by the ERB, fire and re-hire will be almost entirely banned. This change could come into force as early as October 2025, although this isn’t yet confirmed.

The way this is planned to work is that the ERB will make it “automatically unfair” to dismiss an employee for refusing a contractual change. The only exception to this will be for employers which can show that their business is genuinely on the brink of collapse if changes aren’t made. Even if the employer can demonstrate this, they will still need to show they were acting reasonably (likely to mean they have undertaken consultation, made efforts to discuss the changes with the employee and find an agreement, and considered alternative options to dismissal and re-engagement).

For employers that can’t demonstrate the above, they will no longer be able to use this option without risk of Employment Tribunal claims for unfair dismissal by their employees.

What should employers do?

The changes to the fire and rehire will not take place until October 2025 at the earliest. There is still time to prepare for all of the changes, but it is hugely important to take proactive steps to update your contracts, policies and procedures in advance of the Bill being brought into force.

If in doubt, employers should seek legal advice about what their duties are towards their employees, and what to do if they do need to make amendments to their employees’ terms of employment.

Our tips for employers

We recommend that employers looking to make changes to their staff’s terms and conditions think about the following:

• Act now to amend your existing contracts. Employers can use the period before the changes come into effect to consider whether they have scope to start discussions about any changes to contracts now.
• Establish consultation procedures for communication with employees. By engaging your employees in dialogue early and exploring all solutions, an agreeable path may be found without resorting to dismissal.
• Consider strategies for flexibility that don’t rely on fire and rehire. Taking an approach of offering incentives for agreeing to contract changes may be more productive in fostering a better atmosphere in the workplace than fire and rehire would.

If you are an employer which may be affected by the ERB, and you need advice on how best to deal with your obligations to your employees, get in touch using our contact form or contact Ramyar Hassan on rhassan@darwingray.com or 029 2082 9113 to find out how we can help you.

The Future of Work conference on 14^th May 2025 will include sessions on the ERB, including an expert panel with Darwin Gray’s employment law partners on the challenges, changes and predictions for the future. Find out more about the conference here.