Employment Rights Bill | Fire and Rehire

Employment law changes will make it automatically unfair to dismiss staff for refusing contract changes or rehiring on worse terms.

Last updated: 23rd October 2025

>  Read the latest update

The Government is proposing to make it automatically unfair (this becomes a day 1 right for employees) to dismiss employees where the reason for dismissal is either:

1. The employer sought to vary the employees contract of employment and the employee did not agree - OR -
2. The reason is to enable the employer to employ another person, or to re-engage the same employee under a varied contract of employment to carry out substantially the same duties as the employee carried out before dismissal.

A Statutory Code of Practice was introduced in July 2024 and is a guide for employers regarding what steps should be taken before termination. There is a very limited defence for the employer - when the reason for the variation was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business, and in all the circumstances the employer could not reasonably have avoided the need to make the variation.

UPDATE - July 2025

On 7th July 2025, the Government published proposed amendments to the Employment Rights Bill, including important updates for fire and rehire practices.

At this stage, these are only proposals and will be subject to consultation before it is decided if, how, and when they will be implemented.

What’s Changing?

• Proposal to soften the ban.
• The government plans the restrictions on fire and rehire to only apply to specific contract changes—namely pay, pension, hours of work, holiday entitlement, and any other areas set out in regulations.
• Employers will not be able to bypass these restrictions by introducing a new variation clause, although existing clauses will remain valid. Therefore it is really important that you review your contracts of employment now to ensure that if it is not already included, that you get a variation clause in place.  Please contact the Bira Legal Advice Team for further information.
• Changes to place of work or duties are not on the restricted list. Dismissals due to refusal to relocate will not become automatically unfair, and normal redundancy rules will continue to apply.
• If an employee is dismissed for refusing a contract change that isn’t on the restricted list (e.g., routine amendments), it will not be automatically unfair. However, normal unfair dismissal rules and strict consultation requirements will apply.
• There is also a proposal for dismissals based on outsourcing as an alternative to redundancy to be automatically unfair, unless the employer can prove serious financial distress.
• These are significant policy shifts. Further regulations are required to implement and flesh out the detail of what type of contract variations are restricted and how it will work in practice. The government’s Implementation Roadmap indicates that consultation will be undertaken on the changes in autumn 2025 and potentially brought into force in October 2026.

UPDATE - October 2025

Despite the House of Commons rejection of many of the Lords proposals to soften various areas, the Bill now enables accompanying regulations to clarify that expenses and certain types of pay may be out of scope and to specify which changes to contractual benefits (apart from pensions) are covered.

There is still a limited exception for employers facing serious financial difficulties. If “dismissal and re-engagement” is used for contractual changes that fall outside the prescribed categories, the dismissal won’t be automatically unfair (usual fair reasons for dismissal apply), but tribunals must consider factors such as the reason for the change, consultation with staff, and any compensation offered.

The ban also covers “fire and replace” situations, where staff are dismissed and replaced with contractors, agency workers, or others to do the same job. Such dismissals will be automatically unfair unless the employer is in severe financial difficulty and had no reasonable alternative. TUPE transfers and redundancies due to reduced work are excluded. Even where “fire and rehire” might be allowed, in these very limited circumstances, the Code of Practice will still apply but will be updated.