Fire and Rehire Is Being Restricted. How Can HR Change Employment Terms Now?
- 5 Min Read
New Employment Rights Act protections will severely restrict employers’ ability to use fire and rehire from January 2027. HR teams need to rethink how contractual changes are negotiated and implemented.
- Author: HRD Connect
- Date published: Sep 16, 2026
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Changing employment terms is about to become considerably harder for UK employers.
From 1 January 2027, new protections under the Employment Rights Act 2025 will severely restrict the use of “fire and rehire”, where an employer dismisses an employee who will not accept contractual changes and then re-engages them, or replaces them, on different terms.
Under the new rules, dismissals connected to certain changes to core employment terms will become automatically unfair in most circumstances.
The reform was previously expected to take effect in October 2026, but implementation has since moved to January. It will arrive alongside another significant change: the qualifying period for ordinary unfair dismissal will fall from two years to six months.
For HR, this creates a practical challenge. Businesses will still need to restructure, change working arrangements and respond to financial pressures. But forcing through some contractual changes by dismissing employees who refuse them will carry considerably greater legal risk.
What will change in January?
The legislation creates particular protection around what it calls “restricted variations”.
These include reductions to pay, changes to measures of work that determine pay, pension changes, changes to total working hours and reductions to leave entitlement. Certain changes to shift patterns are also expected to be covered.
An employee will generally be automatically unfairly dismissed if they are dismissed because they refuse to accept one of these changes.
The rules also cover “fire and replace”. An employer cannot simply dismiss someone and bring in another person, including in certain circumstances a contractor or agency worker, to perform substantially the same duties under terms involving a restricted variation.
That significantly changes the risk attached to contractual change programmes.
There is an exception, but the bar is high
The legislation does recognise that some businesses can face serious financial difficulties that leave few alternatives.
An exception can apply where an employer can demonstrate financial problems affecting, or likely imminently to affect, its ability to continue operating, that the contractual changes are intended to eliminate or significantly mitigate those difficulties, and that the need for the changes could not reasonably have been avoided.
But this is deliberately narrow.
Even where an employer meets that threshold, dismissal does not automatically become fair. An employment tribunal can still consider factors including whether meaningful consultation took place and whether employees were offered something in return for accepting the change.
For HR, financial pressure should therefore not be treated as a straightforward route around the new protections.
Consultation becomes much more important
If employers cannot rely on dismissal and re-engagement to force through changes to core terms, reaching agreement becomes more important.
That shifts attention towards consultation.
Employers considering contractual changes should be able to explain why they are necessary, what alternatives have been explored and how employees will be affected.
HR should also involve employees, recognised trade unions or employee representatives early enough for consultation to genuinely influence the outcome rather than presenting a decision that has effectively already been made.
This requires more than legal compliance. Employees are more likely to understand difficult changes when employers can demonstrate the business case behind them and show that alternatives have been considered.
Employers need to rethink contractual flexibility
Not every contractual change will fall within the automatic unfair dismissal provisions.
Changes outside the restricted categories will instead be subject to enhanced protections under the ordinary unfair dismissal framework. Tribunals will be required to consider factors including consultation and anything offered to employees in exchange for accepting the proposed changes.
Existing contractual flexibility clauses may also permit some changes, but they are not a universal solution. Their scope depends on how they are drafted and the circumstances in which they are used.
For HR, the priority before January should therefore be reviewing employment contracts and identifying where the organisation might need flexibility in future.
But employers should be cautious about treating new contractual wording as a way of bypassing the reforms. The legislation itself includes certain contractual provisions allowing employers to make protected changes without agreement within the definition of restricted variations.
What should HR do before January?
The immediate task is to understand where the organisation is most exposed.
HR teams should identify any contractual change programmes already planned for 2027 and establish whether they involve pay, pensions, working hours, holiday entitlement or shift patterns.
Existing consultation processes should also be reviewed. Organisations without effective employee forums, representative structures or established approaches to negotiating contractual change may find the new environment particularly challenging.
Decision-makers and line managers also need to understand that the rules are changing. What may previously have been considered a difficult but available final option could soon create an automatically unfair dismissal claim.
That risk is heightened by the wider changes arriving on the same date. From 1 January, employees will generally need only six months’ service to bring an ordinary unfair dismissal claim, while the existing cap on compensatory awards will also be removed.
Contract change needs a different mindset
Fire and rehire has always been a contentious way of changing employment terms. From January, its use for core contractual changes will become significantly more restricted.
That does not mean organisations lose the ability to change.
It means HR will need to place greater emphasis on planning, consultation, negotiation and finding alternatives before dismissal enters the conversation.
Businesses will still face financial shocks. Operating models will still change. Technology will alter roles and working arrangements. Employers will still sometimes need employees to work differently.
The question is how those changes are achieved.
From January, organisations that have relied on contractual leverage may need to rely much more heavily on something harder to legislate for: convincing employees that change is necessary, and working with them to find a way forward.
