As things currently stand, UK employers who wish to change the terms of an employee’s contract, for example, altering working hours, can do so by terminating the existing contract and offering re-employment under new terms. This practice, commonly referred to as ‘Fire and Rehire’ (or technically, dismissal and re-engagement), remains lawful, provided it is handled fairly and within the scope of employment law.

Fire & Rehire came under intense public scrutiny back in 2022 when P&O Ferries dismissed around 800 UK-based crew members without notice, replacing them with cheaper agency staff.

The ban on Fire & Rehire, due to be implemented in October 2026, is supposed to put an end to  these practices.

This would mean that the dismissal of any employee, for refusing to agree to a variation of their contract, would be automatically unfair.  Under the proposed rules, employers would no longer be able to dismiss employees for refusing contractual changes, unless they could demonstrate that such changes were essential to the business’s survival.  The employer would also be under an obligation to follow a six-point consultation checklist.

However, following scrutiny by the House of Lords, the scope of the proposed ban appears to have been significantly diluted. It is now likely that the restrictions will apply only to dismissals arising from “Restricted Variations”, which are defined as changes to: 

• pay
• pension
• required number of working hours including shift times and length
• holiday and time off rights, and
• adding a variation clause to the contract

For any other dismissals made by an employer, due to the employee refusing to agree a change of their employment contract, this can still be a fair reason for dismissal where the employer follows the six-point consultation checklist. The six-point consultation checklist will include considering the reason for the variation, conducting an extensive and meaningful consultation, and considering incentives offered to the employee in return for agreeing to the change.

Importantly, now is the time for employers to review and update employment contracts, particularly to ensure they include a clear variation clause.  While this won’t override the limitations around Restricted Variations, it will help provide a lawful basis for other contractual amendments and may avoid the need for dismissal in the first place.

We will continue to monitor the progress of the legislation as it develops and the amends are finalised. In the meantime, if you would like your employment contracts reviewed or advise on preparing for the upcoming changes, please contact the Employment Team.