Following challenges from the House of Lords regarding the proposed ‘day-one’ unfair dismissal rights and zero-hour contracts, the Commons have made the necessary updates to the Employment Rights Bill, which is now approaching Royal Assent. These changes mean that the Bill will be phased in over the following year, with some measures becoming effective in April 2026 and others postponed until October 2026.
Among these employment law reforms are significant restrictions to the current ‘Fire and Rehire’ practices, which make it possible for employers to dismiss their employees and then re-engage them on new and typically less favourable terms. Despite the introduction of the statutory Code of Practice on Dismissal and Re-engagement in July 2024 and calls for these practices to be banned, Fire and Rehire has continued in the UK, which is why the new Bill will enact tighter controls.
In this article, we will review how the Employment Rights Bill intends to restrict Fire and Rehire, the measures employees can take in response to unfair dismissal, and the circumstances in which Fire and Rehire practices will still be permitted.
How Is the Employment Rights Bill Restricting Fire and Rehire?
The most significant protection for workers’ rights due to be introduced by the Employment Rights Bill is its ‘restricted variations’, which will make it automatically unfair for employers to dismiss someone in an attempt to force changes to the core terms of their employment contract. This is to prevent employers from using dismissal as a bargaining tool.
The ‘restricted variations’ include:
- Pay – This includes the reduction or removal of a ‘sum paid in connection with employment’, variations on the amount of work when an employee is paid relative to the amount of work done, or variations relating to pensions.
- Working hours – This includes variation in the number of hours required to work, variation in the timing or duration of a shift, or a reduction in annual leave.
- Variation clauses – This refers to any attempt by the employer to introduce a ‘variation’ clause that would allow an employer to unilaterally alter terms and conditions.
Additional updates to the Employment Rights Bill will similarly stop employers from replacing their current staff with less skilled and lower-paid workers. Dismissing an employee will be deemed automatically unfair if an employer substitutes them for:
- A casual worker
- An agency worker
- Someone on a weaker contract
How Can Employees Challenge Fire and Rehire Practices?
Whether your employer imposed a ‘restricted variation’ on your contract or you have any other doubts about your experience of the dismissal procedure, you may be able to claim for unfair dismissal. This process will not be changed by the Employment Rights Bill and will require you to submit your claim to the Employment Tribunal. After you have appealed your dismissal internally and gathered evidence in support of your claim, the Employment Tribunal will consider the eligibility of your claim relative to the following circumstances:
- Whether there was a genuine business reason for the contractual change
- How early were you consulted about the change
- Whether any alternatives were explored
- Whether any unfair pressure was applied
- Whether your employer has evidence of a proper process
When Are Employers Permitted to Fire and Rehire?
The only circumstances in which the Employment Rights Bill Fire and Rehire rules do not apply are when an employer can prove their business is in immediate, severe financial danger, such as imminent insolvency. The financial difficulties exception effectively waives the ‘restricted variations’, presenting some scope for employers to make legitimate changes to their employment contracts.
It is important to note that the threshold for financial difficulties is very high, and this exemption cannot be enacted as a cost-cutting exercise. In the wake of these changes, employers should be advised to consider Fire and Rehire practices as a legal last resort, not a negotiation tactic.
Navigate Employment Bill Rights Updates with Newtons Solicitors
We appreciate that the upcoming employment law reforms pose difficulties for employers and employees alike, while raising questions about the legitimacy of prior contractual changes in light of the coming legislation. At Newtons Solicitors, our team of employment solicitors is dedicated to staying abreast of developments in their field, such that we can provide the most accurate legal advice to our clients.
For support challenging a dismissal procedure which you believe was unfair, or for advice on how to handle contractual changes through the official channels, please contact us today, and our friendly advisors would be happy to assist you.