Fire and rehire (dismissal and re-engagement)

The practice of dismissing staff who will not accept a contract change, then offering to re-employ them on the new terms — currently constrained rather than banned, but due to change substantially from 1 January 2027.

Is fire and rehire illegal right now?

Not in itself, as the law stands today. An employer can currently dismiss and offer re-engagement on new terms, provided the dismissal is not for an automatically unfair reason and, if challenged, the employer can show it acted reasonably. What has already changed is that employers must follow the statutory Code of Practice on Dismissal and Re-engagement, in force since 18 July 2024, or risk an uplift of up to 25 per cent on compensation.

What changes from 1 January 2027?

Dismissing an employee because they did not agree to a 'restricted variation' of their contract — broadly, changes to pay, hours, pensions, shift patterns or time off — or dismissing to re-engage or replace them on a varied contract including such a change, becomes automatically unfair in most cases, with no minimum length of service required. A narrow exception applies where the employer can show the change was necessary because of genuine severe financial difficulty threatening the business as a going concern.

Will every contract change count as a restricted variation?

No. The restricted category is aimed at the terms employees rely on most directly — pay, hours, pensions, shift patterns and time off. A dismissal to force through a different kind of change is not automatically unfair under this specific reform, though it can still be challenged as an ordinary unfair dismissal if the employer did not act reasonably, taking into account matters such as consultation and any incentives offered.

What is the Code of Practice on Dismissal and Re-engagement?

A statutory ACAS-style code, in force since 18 July 2024, that sets out steps an employer should take before using fire and rehire — such as exploring alternatives, meaningful consultation, and using it only as a last resort. It does not itself ban the practice, but an employment tribunal can increase relevant compensation by up to 25 per cent if the employer unreasonably failed to follow it.

Do I need two years' service to challenge a fire and rehire dismissal today?

If you are relying on ordinary unfair dismissal, yes, currently two years, though that is reducing to six months from 1 January 2027. If the dismissal falls within a different automatically unfair category — for example, if it is really about whistleblowing or trade union activity — no qualifying period applies now, regardless of the fire and rehire reform's own timeline.

Can my employer still fire and rehire me if the business is struggling financially?

The 2027 reform includes a narrow exception where the employer can show the change was necessary because of severe financial difficulty threatening the business as a going concern. This is a high bar, not a general excuse for wanting to cut costs — the detail of how tribunals will apply it will develop through case law once the provisions are in force.

The current position

As the law stands today, fire and rehire is not automatically unlawful. An employer can dismiss an employee who refuses a contract change and offer to re-engage them — or a replacement — on new terms, provided the dismissal is not for a reason that is already automatically unfair for other reasons, such as whistleblowing, and provided the employer can show, if challenged, that dismissal was a reasonable response in all the circumstances.

Since 18 July 2024, employers have had to reckon with the statutory Code of Practice on Dismissal and Re-engagement, which sets out steps expected before using the tactic, including genuine consultation and exploring alternatives. The Code does not ban fire and rehire, but an employment tribunal can increase relevant awards by up to 25 per cent where an employer unreasonably failed to follow it — a real financial consequence, even without an outright prohibition.

What changes from 1 January 2027

• New automatically unfair category.
• Dismissing an employee because they refused a "restricted variation," or to re-engage or replace them under a contract including one, becomes automatically unfair in most cases.
• Restricted variations defined narrowly.
• Broadly, changes to pay, hours, pensions, shift patterns or time off — the terms employees rely on most directly.
• No qualifying period.
• Protection applies from day one of employment for this specific category, unlike ordinary unfair dismissal.
• Narrow financial-distress exception.
• Available only where the employer can show the change was necessary because of severe financial difficulty threatening the business as a going concern.

In late 2026, an employer tells staff their guaranteed weekend shift pattern will change to a less favourable rota, and that anyone who refuses will be dismissed and offered re-engagement on the new pattern. One employee, with eight months' service, refuses and is dismissed in December 2026.

2027 reform in force?

Code of Practice uplift + ordinary UD (if 2yrs' service)

Because the dismissal happens before 1 January 2027, the new automatically unfair category does not apply. With only eight months' service, she cannot bring an ordinary unfair dismissal claim either under the rules in force at that date. Her strongest route is to check whether the employer followed the Code of Practice, and to look carefully for any other automatically unfair reason that might apply regardless of service length.

Automatic unfair dismissal

ACAS Code of Practice

Code of Practice on Dismissal and Re-engagement

Employment Rights Act 2025

Fire and Rehire — Employment Tribunal Glossary

What fire and rehire (dismissal and re-engagement) means, the current legal position, and how the Employment Rights Act 2025 changes it from 1 January 2027.