3 changes to the proposed ban on fire and rehire

What is fire and rehire?

‘Fire and rehire’ is a strategy used by some employers who – when unable to secure agreement with employees to new contract terms that suit them – resort to dismissing staff, then offering to rehire them on the revised terms. They may also hire new people on the revised terms instead.

Until now, that approach has been lawful if there’s a genuine business reason and the process is deemed fair – though it could still trigger unfair dismissal claims if mishandled.

How will the Employment Rights Bill impact this practice?

The Employment Rights Bill’s initial proposals made using fire and rehire almost impossible, recognising that some employers have used it to strong-arm changes to pay, hours or other conditions. The Bill said it could only be used when the business was in “significant financial distress” attempting to stamp out what the government calls “unscrupulous fire and rehire tactics.”

However, the Government amendments published in the summer softened that position in response to business concerns.

What now? 3 unfair fire and rehire practices

1.Dismissal for a restricted variation is automatically unfair unless there are serious financial difficulties

A ‘restricted variation’ is a specific change to the existing contract terms:

• a reduction in pay
• a pension change
• changes to hours of work
• changes to time of / duration of shifts (which meet conditions specified by the Secretary of State).
• reduced time off
• the addition of a variations clause or any other variation specified in regulations
• Firing someone for refusing to accept a ‘restricted variation’ would count as automatically unfair – unless the employer can meet a very high threshold (see below) to justify it.

To justify it, all three conditions must be met.

Employers need to show:

• evidence of serious financial difficulties affecting (or likely to affect) business viability
• that proposed contract changes are necessary to address or mitigate those financial problems
• there is no alternative – the proposed changes are unavoidable in order to keep the business afloat

Even then, a tribunal will closely examine whether the process was fair – including whether the employer properly consulted with staff or any recognised union, and whether alternatives to dismissal (or any incentives to accept the changes) were seriously explored.

2.Dismissal for an ‘unrestricted’ variation is potentially fair, but the new statutory fairness ‘checklist’ must be used

There are some variations that an employer might want to make which are not restricted variations. For example, changing location and/or amending an employee’s contractual duties.

If an employer wants to fire and rehire to make an ‘unrestricted’ variation, then the dismissal would be potentially fair. Usually, the issue of fairness would then be left to the reasonableness test in s98(4) Employment Rights Act 1996.

However, the Bill proposes a gloss on this by giving tribunals a list of matters it must consider when deciding the fairness of a dismissal for refusing to agree to a variation that is not a restricted variation. The factors comprise: 

• the reason for the variation
• any consultation carried out by the employer about varying the employee’s contract of employment
• anything offered in return for agreeing to the variation
• any additional matters specified in regulations

3.Firing an employee to hire someone new is automatically unfair unless there are serious financial difficulties

If an employer wants to fire an employee for the principal reason of replacing them with a person who is not an employee, eg an agency worker, it’s automatically unfair if the replacement is carrying out substantially the same activities as the employee and if the defence of being in serious financial difficulties doesn’t apply.

Further reading

• Employment Right’s Bill – January update 2025
• Code of practice on fire and rehire in force – Hunter Law
• The Amendment Paper can be accessed here.
• Employment Rights Bill – Top 8 significant changes – Hunter Law
• Employment Rights Bill: factsheets – GOV.UK
• Post General Election update – How will a Labour Government impact your workplace? – Hunter Law

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