Fire and Rehire in Great Britain Explained
Fire and rehire is one of the most controversial practices in employment law in England, Wales and Scotland and, in recent years, it has come under increased scrutiny. Northern Ireland has a separate employment law framework and is not covered by this article. For employers, dismissal and re-engagement may be considered as a last resort where contractual changes are necessary, but agreement cannot be reached. For employees, it can feel like a drastic and unsettling step.
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Understanding when fire and rehire can be used, and how to approach it lawfully, is essential for any business considering changes to terms and conditions. While the concept may appear straightforward, the legal and practical risks are significant.
This blog takes a back-to-basics approach, explaining what fire and rehire means, when it may be used, and what employers must do to reduce risk.
What Does Fire and Rehire Mean
Fire and rehire refers to the process where an employer terminates an employee’s existing contract and offers re-engagement on new terms. It is more formally known as dismissal and re-engagement.
This approach is typically used where an employer wishes to make changes to contractual terms such as pay, working hours, or job roles, and the employee does not agree to those changes.
Unilaterally imposing a change may expose an employer to claims for breach of contract or unlawful deductions from wages. Depending on the circumstances, an employee may work under protest, resign and claim constructive dismissal, or pursue discrimination-related remedies. Dismissal and re-engagement do not remove those wider risks and must not be treated as a routine alternative to obtaining agreement.
Why Employers Consider Fire and Rehire
Businesses do not usually turn to fire and rehire lightly. It is often considered in response to significant operational or financial pressures.
For example, employers may need to restructure roles, reduce costs, or adapt to changes in market conditions. In some cases, contractual terms that were appropriate in the past may no longer be sustainable.
Fire and rehire can therefore be seen as a mechanism for implementing necessary changes where agreement cannot be reached through consultation.
However, the fact that a business has a genuine reason for change does not mean that the process will automatically be fair. The way in which the employer approaches the situation is critical.
The Legal Framework
At its core, fire and rehire involves a dismissal. This means that the usual rules relating to unfair dismissal apply.
Under the current law, an employer will usually seek to rely on “some other substantial reason” as the potentially fair reason for dismissal. A genuine business need may support that reason, but it does not by itself make the dismissal fair.
Having a potentially fair reason is only part of the analysis. A tribunal will consider the strength of the business case, the quality and timing of consultation, the impact on employees, any concessions offered, the level of workforce acceptance and whether less harmful alternatives were reasonably available. An employee may challenge the dismissal even if they accept re-engagement and continue working.
Tribunals will look closely at whether the employer acted reasonably and whether dismissal was a proportionate response.
The Statutory Code of Practice
The statutory 'Code of Practice on Dismissal and Re-engagement' has applied since 18 July 2024 in England, Wales and Scotland.
It applies where an employer envisages that employees may be dismissed and re-engaged, or that replacements may be engaged in substantially the same roles, if agreement to proposed contractual changes cannot be reached. Employers should contact ACAS before raising the prospect of dismissal and re-engagement. The Code requires employers to provide information, engage in meaningful consultation, reconsider their proposals and treat dismissal and re-engagement as a last resort.
The Code does not apply where the employer is genuinely proposing redundancies and does not envisage re-engaging the affected employees, or engaging replacements, in substantially the same roles. Whether the reason for dismissal is redundancy or some other substantial reason depends on the substance of the proposed changes and the surrounding facts.
Although the Code does not create a standalone claim, a tribunal may increase relevant compensation by up to 25% where an employer has unreasonably failed to comply with it. Employers should therefore keep a clear record of the information shared, alternatives considered, employee responses and the reasons for any final decision.
Employment Rights Act 2025 Reforms
The Employment Rights Act 2025 has enacted significant further restrictions. The fire and rehire provisions are expected to come into force on 1 January 2027. Once in force, a dismissal will generally be automatically unfair where the principal reason is that the employee refused a restricted variation, or where the employer dismisses the employee to replace them, or to re-engage them, in the same or substantially the same duties under a contract containing a restricted variation. The Act identifies core restricted variations relating to pay, pension arrangements, working hours and time off.
For private-sector employers, the Act provides a narrow financial-difficulties exception. Broadly, the employer must establish financial difficulties that affect, or are likely in the immediate future to affect, the viability of the business as a going concern; that the contractual variation was intended to eliminate, prevent, significantly reduce or significantly mitigate those difficulties; and that the employer could not reasonably have avoided the need to make the variation.
Separate statutory formulations apply to public-sector employers and local authorities. Even where the exception is engaged, the tribunal must assess reasonableness, including consultation and any incentive offered in return for agreement.
The Importance of Consultation
Consultation is one of the most important aspects of any fire and rehire process. Employers are expected to engage meaningfully with employees and, where applicable, their representatives.
This means more than simply informing employees of a decision. Consultation should begin before a final decision has been made and continue for as long as there is a reasonable prospect of reaching agreement. It involves explaining the reasons for the proposed changes, listening to feedback and genuinely considering whether adjustments or alternatives can be adopted.
Collective consultation obligations may arise because “redundancy” has an extended meaning for these purposes and can include dismissals arising from a dismissal-and-re-engagement exercise. Under the current establishment-based test, the obligations are triggered where an employer proposes to dismiss and re-engage 20 or more such dismissals employees at one establishment within a period of 90 days or less. Consultation must begin in good time and at least 30 days before the first dismissal where 20 to 99 dismissals are proposed, or at least 45 days before the first dismissal where 100 or more are proposed.
For dismissals taking place on or after 6 April 2026, failure to comply can result in a protective award of up to 180 days’ gross pay for each affected employee, although the tribunal retains discretion to award what is just and equitable redundancy guidance.
Further threshold changes are expected in 2027. The existing trigger of 20 or more proposed redundancies at one establishment within a period of 90 days or less will remain, but an additional organisation-wide threshold will require employers to aggregate proposed redundancies across all establishments over the same period. The level of the new threshold has not yet been settled and will be set by regulations. The Government consulted on either a fixed threshold within the range of 250 to 1,000 proposed redundancies or a tiered threshold based on workforce size.
A well-managed consultation process can often avoid the need for dismissal altogether or at least reduce the risk of disputes.
When Fire and Rehire May Be Lawful
Under the current law, dismissal and re-engagement is not prohibited, but the statutory Code requires it to be treated as a last resort. The Employment Rights Act 2025 will materially restrict the practice once its relevant provisions are in force. Employers should therefore analyse both the current framework and the forthcoming protections before proceeding.
Situations where it may be lawful include:
- Where there is a genuine and pressing business need to change terms and conditions
- Where meaningful consultation has taken place and agreement cannot be reached
- Where the employer has considered alternatives and can demonstrate that dismissal is proportionate
- Where a fair procedure has been followed, including giving the employee their contractual or statutory minimum notice, whichever is greater, and offering a right of appeal
Even in these circumstances, there is no guarantee that a tribunal will find the dismissal to be fair. Each case will turn on its own facts.
The Risks for Employers
Fire and rehire carries a number of legal and practical risks. The most obvious is the risk of unfair dismissal claims. Under the current ordinary unfair dismissal regime, employees with the necessary qualifying service may challenge the fairness of the dismissal. If successful, this can lead to compensation and, in appropriate cases, an order for reinstatement or re-engagement. Once the new restricted-variation provisions are in force, dismissals falling within those provisions will generally be automatically unfair.
There is also a risk of breach of contract and unlawful deduction from wages claims if changes are imposed without agreement. Changes to pay, hours, shifts, working location or benefits may place employees who share a protected characteristic at a particular disadvantage, creating indirect discrimination risk unless the measure can be objectively justified. Employers should assess equality impacts and consider reasonable adjustments for disabled employees.
In recent years, there has been increased public and political attention on the use of fire and rehire. This has led to greater scrutiny and an expectation that employers will use the practice responsibly.
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Alternatives to Fire and Rehire
Before turning to fire and rehire, employers should carefully consider whether there are alternative ways to achieve their objectives.
In many cases, changes can be implemented through agreement, particularly where there is clear communication and a willingness to engage with employees.
Other options may include phased changes, temporary measures, or offering incentives for accepting new terms.
Exploring these alternatives is not only good practice but also helps demonstrate that dismissal was a last resort if the matter is later challenged.
Best Practice for Employers
If fire and rehire is being considered, employers should take a structured and careful approach.
- Contact ACAS before raising the prospect of dismissal and re-engagement, and do not use a threat of dismissal as a negotiating tactic
- Clearly identify and document the business reasons for the proposed changes
- Engage in meaningful consultation with employees and representatives
- Consider and document any alternatives to dismissal
- Provide clear information about the proposed new terms
- Assess equality impacts, consider reasonable adjustments and consult recognised trade unions or elected representatives where required.
- Keep a written decision record and ensure that only terms covered by the information-sharing and consultation process are changed
- Follow a fair dismissal process, give contractual or statutory minimum notice (whichever is greater), confirm any offer of re-engagement clearly and provide a right of appeal
Taking these steps can help reduce the risk of claims and demonstrate that the employer has acted reasonably.
The Human Impact of Fire and Rehire
It is important to recognise that fire and rehire is not just a legal process. It has a real impact on people. For employees, the prospect of losing their job unless they accept new terms can be stressful and unsettling. It can affect morale, trust, and engagement.
Employers who approach the process with sensitivity and transparency are more likely to maintain positive relationships, even in difficult circumstances. Balancing business needs with fairness and respect is key.
Considering Fire and Rehire in Your Business
The legal landscape has moved beyond debate. Employers must comply with the statutory Code of Practice now and prepare for the more restrictive Employment Rights Act 2025 regime when the relevant provisions come into force.
Any proposal should be supported by a robust business case, genuine consultation, careful consideration of alternatives and a documented assessment of individual, collective and equality risks.
Employers who take a cautious and considered approach will be better placed to navigate these challenges.
Dismissal and re-engagement remains a high-risk strategy. It should be contemplated only after reasonable attempts to reach agreement have failed and the employer is satisfied that dismissal is genuinely a last resort.
Given the potential for unfair dismissal, protective award, contractual and discrimination claims, employers should take legal advice before announcing proposals or referring to dismissal and re-engagement.
Our Business Employment Law experts support employers in managing complex employment law issues with clarity and confidence. If you are considering changes to terms and conditions or need advice on fire and rehire, our Employment Law team is here to help.
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