Fire and rehire: what employers can and cannot do

'Fire and rehire' is the practice of dismissing employees and offering to re-engage them on less favourable terms and conditions. Section 28 of the Employment Rights Act 2025 will make specified dismissals automatically unfair once it is commenced; that restriction is not yet in force.

What counts as fire and rehire

Fire and rehire occurs when an employer:

1. Dismisses an employee (or threatens dismissal)
2. Offers to re-engage them on different terms
3. The new terms are less favourable than the original terms

This includes:

• Reducing pay or benefits
• Removing contractual entitlements
• Changing working patterns or hours
• Removing flexible working arrangements
• Any other detrimental changes to terms and conditions

Fire and replace

The planned section 28 restrictions also cover specified 'fire and replace' dismissals once commenced. This occurs when an employer:

1. Dismisses an employee
2. Replaces them with a non-employee (contractor, agency worker, outsourced worker)
3. The replacement arrangement is on worse terms

The financial difficulties exception

Once section 28 is commenced, a limited exception is expected where fire and rehire may not be automatically unfair:

ACAS Code of Practice requirements

Even where the exception might apply, employers must follow the ACAS Code of Practice on Dismissal and Re-engagement (in force since July 2024):

Before consultation

• Explore all alternatives to dismissal
• Prepare clear explanation of why changes are needed
• Gather evidence of financial difficulties (if relying on exception)

During consultation

• Consult in good faith with employees and representatives
• Share relevant information openly
• Allow reasonable time for consultation
• Consider alternatives proposed by employees
• Do not issue ultimatums or artificial deadlines

Before any dismissal

• Exhaust all reasonable alternatives
• Give proper notice
• Allow appeal against dismissal

Consequences of non-compliance

What to do instead

If you need to change terms and conditions:

1. Negotiate voluntary agreement: Seek agreement to changes through genuine negotiation
2. Offer incentives: Consider signing bonuses or other incentives for agreeing changes
3. Phase changes: Introduce changes gradually over time
4. Review alternatives: Consider whether there are other ways to achieve your business objectives
5. Accept refusals: If employees refuse, you may need to accept different terms for different employees