End of the Road for ‘Fire & Rehire’
What Business Owners Need to Know About the Upcoming Ban
Visual representation of the impending restrictions on ‘Fire & Rehire’ practices with a crossed-out ‘Hire’ and ‘Fire’ keyboard keys
The practice known as ‘Fire & Rehire’—where employers terminate contracts and offer re-employment on altered terms—is set to undergo significant restrictions under new UK legislation. While some businesses have used this method to handle operational challenges, its days may be numbered.
With the Employment Rights Bill moving through Parliament, comprehensive changes are anticipated to be implemented by October 2025. Once this law is enacted, it will drastically limit the ability of business owners to enforce contract modifications by dismissing and rehiring employees.
The legislation recognises the need for flexibility in employer-employee relationships but sets firm limits on how changes can be implemented without mutual agreement.
For business owners, it’s crucial to assess current practices to avoid legal and reputational risks. Taking proactive steps to review contracts, policies, and strategies is vital for compliance.
Transforming the Legal Approach
Traditionally, Fire & Rehire has been a method for enforcing changes when employee consent was unattainable. The upcoming legal framework completely redefines this approach. Terminating an employee for refusing new terms will now be considered automatically unfair dismissal, strengthening worker protections significantly.
This legislative shift is especially impactful for industries that depend on flexible workforces, such as hospitality, cleaning, and security. Business owners who have adjusted working hours or shift patterns based on client demands may lose the legal freedom to do so without explicit employee consent.
Furthermore, a new statutory Code of Practice will provide guidelines for managing contract changes. Although not legally binding, this Code will influence tribunal decisions, with penalties for non-compliance. Business owners must incorporate these guidelines into their procedures to minimise liabilities.
Limited Exceptions
Despite stricter regulations, there will still be specific situations where dismissal and re-engagement are permissible. Business owners can only take this route if they can clearly demonstrate:
- The essential nature of contractual changes to prevent severe financial hardship threatening business viability.
- The absence of reasonable alternatives at the time.
This exemption is not a loophole for convenience but is intended for critical situations like insolvency risk. Business owners must present compelling evidence and maintain detailed records to avoid legal issues.
Avoiding Risks
Some business owners might consider disguising Fire & Rehire as redundancy or using variation clauses to enforce changes. However, these methods carry substantial risks.
Tribunals are likely to scrutinise attempts to label contract changes as redundancy without genuine job elimination. Relying solely on variation clauses, especially when unfavourable to employees, may not withstand legal challenges. The legislative trend favours mutual agreement over imposed changes.
Replacing dismissed employees with agency workers is another risky option, raising ethical concerns and potential legal violations. Business owners should consider the reputational and financial consequences of such tactics.
Even if not explicitly illegal, these strategies may violate the spirit of the new Code of Practice, increasing the likelihood of higher compensation awards in tribunal decisions.
Non-compliance could lead to significant costs. Besides unfair dismissal claims, business owners might face punitive damages and reputational damages, affecting recruitment and retention efforts during times of workforce instability.
Preparing for Change
Time is of the essence. Business owners must quickly evaluate whether upcoming changes to key terms—like hours, location, or shift structure—are necessary. Acting now, while the current legal framework allows more flexibility, is crucial.
Begin with a comprehensive review of employment contracts, focusing on variation clauses and updating them to align with the new legal environment. Seeking legal advice ensures compliance with the forthcoming law.
Beyond contracts, establishing effective consultation processes is essential. Transparent communication with employees will be a cornerstone of legal compliance. Incentives and voluntary agreements are safer alternatives to unilateral changes.
Strategically, businesses should find ways to incorporate flexibility without relying on dismissals, such as collaborative scheduling, voluntary contract changes, or rotational staffing models.
Finally, business owners and managers should undergo training on the Employment Rights Bill’s implications. Awareness, preparation, and a consultative approach are key to compliance and minimising disruptions.
A New Era for Business Owners
The impending ban on Fire & Rehire marks a significant shift in employment law. While some business owners may find these changes restrictive, they also offer an opportunity: to cultivate fairer, more transparent employment relationships that inspire trust and withstand scrutiny.
By acting early, reviewing practices, and investing in employee engagement, business owners will not only remain compliant but also be better equipped to navigate future workforce challenges.
If you lack in-house HR, consider partnering with external HR professionals for guidance through these changes.