Getting Ahead of UK Employment Rights Bill Changes: Fire & Rehire Restrictions

The upcoming Employment Rights Bill promises one of its most impactful reforms yet—significantly curbing the practice of “fire & rehire”. This will redefine how employers can enforce contractual changes, replacing threats of dismissal with genuine dialogue and fairness.

Fire and rehire, when companies fire employees and offer to rehire them for the same/similar role with less favourable conditions, has long been controversial. Although not illegal, it damages employee trust and can lead to reputational damage if used often.

Though a full ban isn’t on the table, the shift in the legal landscape will make reliance on this tactic risky.

Understanding the Change

Your fire and rehire alternatives: Step-by-step compliance roadmap

Review and reclassify variations

The Employment Rights Bill introduces “restricted variations” (pay, pensions, hours, holiday, etc.) where dismissal and rehire will be automatically unfair. Audit roles and contracts to identify changes that may fall under these variations. Audit contracts across your workforce to identify the most exposed roles (hourly staff or shift-based workers).

Avoid using fire & rehire as a default

Reserve dismissal as an absolute last resort. Establish an internal decision protocol requiring senior-level sign-off before fire & rehire is even considered. Look for alternatives, such as:

• Redeployment or reassignment: Rather than forcing changes to an existing role, offer employees a new one reflecting the new conditions. Make the offer more attractive by combining it with upskilling or retraining, to frame it as a new opportunity rather than a reduction of benefits.
• Voluntary agreement and negotiation: An honest conversation with staff about why changes are needed, potentially including incentives or compensation. The outcome should be consensual changes, agreed on by both parties.
• Phased or temporary changes: Frame any changes to pay/benefits as a shared survival tactic if imposed due to downturns. Propose cuts for a limited period until circumstances improve.
• Union engagement: Engaging with unions shows that you, the employer, acted in good faith. This will be even more important once the changes roll out. Collective bargaining usually leads to compromise solutions, like smaller pay cuts in exchange for job security.
• Contractual flexibility: Some contracts already contain variation clauses, allowing for future adjustments in working hours or duties. These must always be included reasonably and transparently to avoid damaging trust.
• Voluntary exit schemes: If changes are unavoidable and agreement can’t be reached, voluntary redundancy or enhanced exit packages can be offered.

Whichever route you decide to take, all conversations must be conducted transparently, and any developments must be documented. This maintains trust among employees and mitigates legal risk.

Strengthen consultation protocols

Tribunals expect employees to be meaningfully engaged with and consulted, not merely informed. Avoid this style of ‘tick box’ consultation by strengthening your protocols. This should include structured consultation meetings, written and data-backed business rationale, sufficient time for employee response, and documentation at each stage.

If financial necessity applies—document heavily

If you’ve exhausted all other options, you’ll need to prove that you resorted to fire & rehire due to severe financial distress. Your evidence must be specific and detailed (eg, cash flow forecasts), along with minutes of board/leadership discussions showing why alternatives were rejected. Be ready to demonstrate that the variation requested was the least drastic option available.

Update contracts and policies

Under the new rules, contracts will be scrutinised for aggressive flexibility clauses or threat-laden language. Review standard templates and remove harsh “catch-all” clauses, and add language on mutual consultation and voluntary agreement. Ensure staff handbooks explain consultation processes clearly.

Train managers and HR

Managers are the first line of communication and can either de-escalate or inflame conflict. Provide scenario-based training on how to handle employee objections, and provide an FAQ guide to handling sensitive conversations. Build awareness of the legal consequences of mishandling variation discussions.

Monitor legal and parliamentary progress

The bill leaves some details to be set out in secondary legislation, and these could shift in scope. Implement scheduling and tracking for upcoming regulations—such as what counts as restricted variation—and monitor tribunal precedent.

Helpful resources:

If you’re rethinking your organisation’s approach to contracts and hiring, here are some extra resources you may find useful:

• A Complete Guide to Employment Contract Types
• Contract vs. Full-Time Employee: All You Need to Know
• Introducing a Faster and More Efficient Way to Request Changes to Employee Agreements