UK Government’s Plan to Restrict ‘Fire and Rehire’

UK Government’s Plan to Restrict ‘Fire and Rehire’ Practices in the Workplace

One of the main changes to legislation introduced in the UK Government’s Employment Rights Bill back in 2024 was the proposal to impose restrictions on the practice of dismissal and re-engagement, otherwise known as ‘fire and rehire’.

Fire and re-hire is where employers dismiss employees with the aim of then re-employing them under new terms, which in some cases may be less favourable than their previous terms.

This practice faced a great deal of scrutiny back in March 2022, when P&O Ferries dismissed 800 employees without consultation, which led to the creation of a new Code of Practice on dismissal and re-engagement in 2024.

The new legislation outlined in the Employment Rights Bill will help to protect workers’ rights by making it automatically unfair for employers to dismiss an employee for refusing a contractual change to their contract, except in the case of severe financial distress.

However, even where financial distress can be justified, employers must still prove that dismissal was a reasonable option and comply with the relevant Code of Practice.

Overall, this will make it significantly harder for employers to change contractual terms.

There is some debate as to when exactly this will come into force, but at its earliest, this could be introduced towards the end of 2025.

In recent discussions within the House of Commons, this has already led to protective awards being doubled from 90 to 180 days’ gross pay per employee when employers fail to comply with collective redundancy and the Code of Practice for dismissal and re-engagement.

In light of these changes, it is even more important to work with employees when considering contractual changes, by carrying out meaningful consultation, aiming to seek agreement and considering any alternative options rather than dismissal.