UK fire-and-rehire rules: What’s still up for debate and how employers should prepare

Stricter fire-and-rehire rules are coming. With broader statutory protections and a sharply heightened risk profile, employers should prepare now to ensure they are in the strongest position when the new regime takes effect.

The fire-and-rehire provisions have found their way into the Employment Rights Act 2025 with surprisingly little attention. While the Government pitched these rules as a crackdown on unscrupulous employers seeking to exploit workers, the reality is far broader. Any employer looking to change terms and conditions of employment without employee consent or clear contractual flexibility could be caught by the new regime. These changes sit alongside wider enhancements to unfair dismissal protection – a shorter qualifying period, the removal of the compensation cap and a doubled protective award cap – meaning employers will need to approach contractual changes with far greater care. Now is the time to prepare so you are well-positioned when the new rules take effect in ten months’ time.

The new rules

Unless an employer is in severe financial difficulty with no viable alternatives, it will be automatically unfair to dismiss employees who refuse to accept "restricted variations", or to re-engage or replace them with someone (including a non-employee) on those varied terms. “Restricted variations” are changes to core contractual terms covering pay reductions, pension, total working hours, time off, and certain shift patterns and other categories set by regulations, as well as any new clauses permitting these types of changes to be made unilaterally. 

In practice, this will bite harder than many employers realise. Post-acquisition harmonisation of terms, cost-reduction programmes, changes to bonus or commission structures, and restructuring projects that involve altering working patterns could all fall within scope.

Where an employee is dismissed for refusing to agree to a non-restricted variation, the dismissal will be potentially unfair. Tribunals will apply enhanced fairness standards, considering both the ordinary principles of unfair dismissal and additional statutory factors, including the reason for the variation, the quality of consultation undertaken with employees or the relevant trade union, and whether any incentive was offered to secure agreement.

Government seeking views

The Government is currently consulting on the scope of restricted variations in two specific areas:

• employment expenses and benefits in kind; and
• shift patterns.

The consultation closes on 1 April 2026, and the new fire-and-rehire restrictions are now expected to take effect in January 2027.

Expenses and benefits

The Government's preferred option is to exclude all expenses and benefits in kind from the scope of restricted variations involving pay. This would mean that employers could use fire-and-rehire to reduce or remove benefits or payments in kind – such as travel allowances, company cars, private medical insurance, gym memberships, and similar perks – without triggering automatic unfair dismissal, although employees could still bring ordinary unfair dismissal claims.

Shift patterns

For shifts, the Government prefers a narrow list of protected changes with only the most significant changes being in scope: moves from day shifts to night shifts (or vice versa); and moves from weekdays to weekends (or vice versa).

Consent and contractual flexibility will still remain valid methods to change terms and conditions

The Government emphasises that the new regime will apply only to changes made through fire and rehire. Employers will still be able to make changes (even those that are “restricted variations”) through other lawful means. In essence: 

• As is the situation now, terms and conditions can be changed with the consent of employees, whether individually or collectively. It will be necessary to consult with them, and usually to offer some incentive to agree to the change.
• Some employment contracts include flexibility clauses that permit specific or general changes. However, these clauses do not give employers carte blanche. They have to be exercised reasonably, in line with implied terms, and tribunals will interpret them narrowly and typically in favour of the employee. For example, a clause permitting "reasonable changes to duties" is unlikely to support a wholesale restructuring of someone's role. Technically, exercising a genuine flexibility clause is not a contractual variation.

Steps employers can take now

Audit variation clauses

Contracts that already include flexibility provisions will remain valid. But introducing new or wider variation clauses that cover restricted variations after January 2027 (via fire-and-rehire) could itself amount to a “restricted variation” and trigger automatic unfair dismissal. Now is the time to review your template contracts and consider whether additional flexibility provisions should be incorporated for new hires or current employees.

Plan your change programmes

If business restructuring, M&A integration, site consolidations, or operational changes are on the horizon, map out which proposed changes hit the restricted variation categories and which do not. Where possible, consider accelerating change programmes to complete before January 2027. Fire-and-rehire still remains an option but should be used with extreme caution, and as a last resort, in line with the current statutory code of practice. 

Review consultation practices

The enhanced fairness test requires tribunals to consider whether you consulted properly and offered anything in return for changes. Good consultation practice is no longer just risk mitigation – it is a legal requirement. Build sufficient time into project plans for meaningful engagement with affected employees and relevant trade unions.

Consider establishing an employee representative body

One consequence of the new rules is a likely proliferation of employee representative bodies as an alternative to trade unions. For employers without an existing union or employee representative body presence, establishing such a body may facilitate collective consultation and make future change programmes easier to negotiate and implement.

Train your people managers

Front-line managers are often the first to communicate changes to employees. Ensure they understand what falls within the restricted variation categories and the importance of following proper processes. Poorly handled conversations can undermine even well-planned change programmes.

Document your business rationale

If you do need to make changes that fall within the restricted variation categories, contemporaneous records of your business reasoning and the alternatives considered will be essential. 

Respond to the consultation

If the scope of restricted variations matters to your business, consider responding to the Government consultation before the 1 April 2026 deadline. Industry feedback may influence where the final boundaries are drawn.

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