The government is cracking down on so-called “fire and rehire” tactics — where employers dismiss staff who refuse new terms and then offer to rehire them on revised contracts. While this approach has long been controversial, it’s about to become almost impossible to use legally in most circumstances.
What’s Changing
Under the new Employment Rights Bill, dismissing employees to impose new contract terms will be automatically unfair if the change involves what the law calls a “restricted variation.”
A restricted variation includes:
Reducing pay or benefits
Changing pension arrangements
Altering working hours or shift patterns
Cutting entitlement to time off
Adding a blanket “variation clause” allowing changes without consent
In other words, if you try to change any of the key terms that directly affect someone’s pay, hours, or conditions — and they say no — you can’t simply dismiss and rehire them anymore.
There’s only one narrow exception:
You can justify dismissal only if your business is in serious financial difficulty, the change is essential to survival, and no other option exists.
That’s an exceptionally high bar — and tribunals will look closely at your consultation process, financial evidence, and whether you genuinely explored alternatives.
What about other contract changes?
Not every change is banned. Some “unrestricted variations” — like a change of work location, updated job duties, or new restrictive covenants — may still be possible if handled fairly.
However, the Bill introduces a new fairness checklist. Tribunals will assess:
The reason for the change
Whether proper consultation took place
Whether anything was offered in return
Any other relevant factors
So while dismissal for refusing an unrestricted change isn’t automatically unfair, employers will still need to show reasonableness and procedural fairness.
Replacing employees with non-employees
If you dismiss employees and replace them with contractors, agency staff, or other non-employees doing essentially the same work, that dismissal will also be automatically unfair — unless your organisation meets the same “serious financial difficulty” test.
What HR should do now
The new rules signal a cultural shift: employers must move from “impose and defend” to “consult and agree.” Here’s how to get ahead of the change.
1. Plan ahead
Think strategically about the next few years. Will you need to change working hours, pay, or job structures due to technology or restructuring? If so, start preparing early — these changes will need to be achieved through consultation and agreement, not dismissal.
2. Educate leadership
Many senior leaders still think “fire and rehire” is a fallback if staff won’t agree. It’s not. Make sure they understand that the new law leaves almost no room for this approach. Collaboration, not coercion, is now the only safe route.
3. Strengthen consultation processes
Tribunals will expect to see meaningful consultation — with unions, employee forums, or individuals. Document every step, from the business rationale to the options explored and any incentives offered for agreement.
4. Prepare for genuine emergencies
If your business is in serious trouble, keep a full record of financial data, forecasts, and the steps you took to avoid dismissals. Even in a crisis, consultation is required. Dismissal and rehire should now be viewed as a last resort for survival, not a negotiation tactic.
5. Follow the Acas code
The Acas Code on Dismissal and Re-engagement is already in place — and tribunals can increase compensation by up to 25% if you ignore it. The Code and the new Bill are aligned in one message: consult properly, and exhaust all other options first.
6. Challenge misconceptions
Calling a fire-and-rehire process “redundancy” won’t help if the job isn’t genuinely disappearing. Likewise, dismissing one or two employees for refusing a change could still trigger automatic unfair dismissal. Always explore flexible, individual solutions instead.
7. Be practically prepared
Create templates, FAQs, and consultation plans to help managers communicate proposed changes clearly and fairly. In unionised environments, expect tougher negotiations — unions now know the law is on their side.
The bottom line
The Employment Rights Bill makes one thing clear: contract terms agreed in good faith must be respected. Employers can still make changes — but only through genuine consultation, agreement, and transparency.
For HR professionals, this means leading the shift towards trust, collaboration, and fair negotiation. “Fire and rehire” isn’t just risky — it’s fast becoming a relic of the past.
This article was created with insights from Lex HR - your always-on HR legal assistant. Lex HR helps HR professionals navigate complex employment law with confidence, providing real-time, reliable advice tailored to your needs. Try it free today and see how much easier compliance can be.
