New Government Consultation on ‘Fire and Rehire’: What Employers Need to Know

The Government has launched a fresh round of consultations on various measures being introduced by the Employment Rights Act 2025, including in relation to new restrictions on the practice of ‘fire and rehire’.

Fire and rehire under the Employment Rights Act 2025

The Employment Rights Act 2025 introduces significant changes designed to restrict the use of fire and rehire, with the relevant provisions expected to take effect in January 2027 (having been deferred from October 2026 by the Government).

Under the Employment Rights Act 2025, it will become automatically unfair to dismiss an employee for refusing to agree to changes to certain core contractual terms, described as “restricted variations” unless an employer can demonstrate that it is in severe financial difficulty and it could not reasonably avoid making the change. At present, “restricted variations” include (but are not limited to) changes to pay, pensions, total hours and holiday entitlement.

This represents a fundamental shift from the current position, where dismissals linked to contractual changes are lawful and are assessed under the general test of fairness.

What is the consultation about?

The Government is seeking views on whether changes to expenses and benefits, and changes to shift patterns, should be “restricted variations” under the Employment Rights Act 2025.

Expenses and benefits

The Government’s preference is for all expenses and benefits to be excluded from the definition of “restricted variations”. If adopted, this would allow employers to make changes to benefits and expenses through dismissal and re-engagement without triggering automatic unfair dismissal protection, although any such dismissals would still need to be fair.

Shift patterns

The Government’s view is that only shift changes which would have an extreme impact on employees should be included within the definition of “restricted variation”, such as:

• Moving from day to night work (or vice versa)
• Moving from weekday to weekend work (or vice versa)

The Government is also seeking views on whether changes to shift patterns should be entirely excluded from the definition of “restricted variation”.

Responding to the consultation

The consultation closes on 1 April.

Employers, particularly those operating shift-based or 24/7 models, may wish to submit a response to the consultation setting out:

• the operational challenges; and
• the importance of flexibility in their industries.

What should employers do now?

Although the fire and re-hire reforms are not expected to come into force until 2027, employers should start preparing now. Practical steps include:

• Think carefully about timing: Where contractual changes are already under consideration, employers may want to progress them sooner rather than later, and in good time before implementation of the reforms in 2027.
• Review contracts to make sure flexibility and variation clauses are well drafted: It may be possible to rely on such clauses to vary terms and conditions without needing to obtain consent (e.g. mobility clauses or general flexibility clauses), however employers should be aware that their use is heavily restricted and are often interpreted in the favour of employees.
• Consider incentives in return for agreement to changes: Even now, gaining consent to change is the easiest and less risky route. That will be even more the case once the reforms are implemented. In return for consent to a change, an employer needs to provide consideration (i.e. some form of benefit) for the change to be legally binding but also to encourage agreement. It doesn’t have to be a financial incentive – don’t be afraid to think outside the box!
• Robustly maintain financial documentation:  This is important if employers might wish to rely on the ‘financial constraint’ exception.

If you have any questions about the consultation or any of the reforms under the Employment Rights Act 2025, please get in touch!