There have been further amendments to the Employment Rights Bill (the “Bill”) as it makes its way through Parliament. The initial changes proposed by the Bill in April 2025 effectively rendered the use of fire and rehire as at an end and impracticable. This approach has now been softened in a number of ways, including only applying to “restricted variations”.
Many Employers will be familiar with the concept of “fire and rehire”. It is a practice used by Employers when they are unable to obtain agreement from staff to changes of their contracts. Instead, Employer’s dismiss the staff member and offer to rehire them on the new terms (or else hires someone new on those terms instead).
Currently, that approach can be lawful if there is a genuine business reason and the process is fair, although we would always recommend that Employers take (and follow!) legal advice because, if mishandled, this practice can lead to expensive and time-consuming Tribunal claims for unfair dismissal.
Since the Bill was introduced, the core premise has been that it will be automatically unfair to dismiss someone either for refusing to agree to a variation to their contract of employment or to replace them with someone on varied terms and conditions but undertaking essentially the same work. In short, eliminating the practice of fire and rehire unless the employer can meet a high threshold to justify it.
That approach may now dramatically shifted with proposed amendments softening the ban in a number of ways as set out below.
The right will only apply when the proposed variation in the contract is a “restricted variation”. The definition of “restricted variation” covers pay, hours, shifts, pensions, overtime, annual leave or time off. It also includes seeking to amend contracts to include a variation clause in the contract which would enable the employer to make a variation to the contract without the employee’s agreement.
In simpler terms, it appears to relate to anything which would make the employee worse off.
Interestingly, this does not cover working hours, changes to location, employee’s duties or reporting structures, minor variations not relating to pay. The Secretary of State is also given the power to make Regulations excluding variations relating to expenses or payments or benefits in kind. No further details on what is proposed have been provided yet but this could create loopholes for Employers.
Another amendment deletes the statutory checklist that was required so once a genuine solvency risk is proved, the reasonableness test for unfair dismissal applies. However, any dismissal is high risk as if the argument of financial distress cannot be established if the changes are not made, any dismissal would then be automatically unfair.
In short, Employer’s will have to be facing severe financial difficulty and have no choice but to change staff contracts to keep the business viable before they can try to defend the claim. Even with evidence proving that, the tribunal will scrutinise the fairness of process including (but not limited to) whether there was genuine consultation and whether alternatives to dismissals were properly considered.
There would be no automatic unfair dismissal. Dismissals for an unrestricted variation are potentially fair, but the Bill still proposes to introduce a statutory “checklist” for this type of dismissal which sets out factors which the Tribunal must consider when determining fairness, including the reason for the variation, incentives for agreeing to the change and any additional matters specified in regulations. Such factors are usually taken into consideration under the current test in unfair dismissal cases so this change does not appear to extend the law dramatically, save for any additional statutory regulations which may be introduced at a later date and a stricter procedure which must be followed.
Quite simply, no.
The original draft of the Bill didn’t extend to situations where an employer was seeking to make changes by dismissing employees and replacing them with non-employees (i.e., agency workers or contractors), however the Government have now plugged that gap.
This new right does not depend on whether the replacement would be engaged on varied terms and conditions but applies whenever an employee is dismissed for the principal reason of replacing them with a person who is not an employee. Doing so is automatically unfair provided that the replacement is carrying out substantially the same activities as the employee, unless the Employer can rely on the defence of severe financial difficulty (as above). Expect more scrutiny of IR35, agency use and TUPE avoidance.
As discussed in our earlier article, the Government have published a roadmap for implementing the Bill, with consultation on fire and rehire due to start this Autumn with a view to the new law coming in October 2026. Employers will want to pay close attention during the consultation process to stay live to any potential widening of the scope of the Bill and may also want to take part in the consultation.
Whilst the Bill does not ban changes to contracts outright, in its current form it does mean that in nearly all scenarios, changes will need to be agreed or reached through proper consultation. Our top tips for preparing for the change are:
We are here to support you through the changes to your business by reviewing and updating your policies and procedures to ensure compliance with the legal changes, advising you on concerns or disputes with your workplace, reviewing your employment contracts and offering training to your staff. To get in touch, call 01732 770660 or email Hope at [email protected] or Louise Brenlund at [email protected]
We will keep you updated as consultations continue through the Autumn and into early 2026, so be sure to return to our website and keep viewing our socials on this subject.
We are also running an in-person seminar covering and discussing the changes, joining details can be found here.
This article is for general information only and does not constitute legal or professional advice. Please note the law may have changed since this article was published. We do not accept responsibility or liability for any actions taken based on the information in this article.
