The practice of “fire and rehire” has been the centre of growing debate, particularly as employment laws evolve and employee expectations shift. While the approach can help organisations implement essential contractual changes, it also carries legal, practical, and reputational risks. Below, we outline what fire and rehire involves, the challenges it creates, and the significant legal changes arriving in 2027.
What Is Firing and Rehiring?
Firing and rehiring is when an employer ends an employee’s contract of employment with notice and then offers to re-employ them immediately afterwards on different terms and conditions. This approach ensures that continuity of employment is preserved and is a strategy used when employers wish to amend the contractual terms and conditions of employees but cannot get the employees’ consent to the change.
Changing Terms and Conditions
Although contracts of employment usually state that the employer is entitled to vary the terms and conditions, in practice this cannot be viewed as permission to the employer to change anything they want. The more specific the contract is about what can be changed, the more likely the change would be held to be fair. For example, if the contract states that an employee is required to work 9.00am to 5.00pm but this ‘may be changed to 9.15am to 5.15pm upon two months’ notice’, it would probably be fair to enforce this change. However, if the same contract just states that the employee’s hours ‘may be changed’ then the employer requiring the employee to start working a night shift upon a few days’ notice, is unlikely to be fair. However, there is a large grey area between these two extremes.
Consultation and Seeking Consent
If an employer wishes to change employees’ terms and conditions then they would normally consult with their employees, explain the reasons for the proposed changes and seek the employees’ consent. They may try to offer incentives for the employees to agree. For example, if an employer wished to remove the benefit of free gym membership, they may offer employees extra annual leave.
If consent cannot be obtained, then employers need to weigh up the reasons why the changes are necessary, and the consequences of employees continuing with their current terms and conditions. They then need to make the decision of whether to leave the situation as it is or try to force the change through.
Risks of Firing and Rehiring
The risks of fire and rehire are unfair dismissal claims, constructive unfair dismissal claims (in the situation where an employee resigns claiming a fundamental breach of the contract), and damage to the employer’s reputation.
Therefore, fire and hire is rarely advisable. It may sometimes be acceptable where the change is genuinely necessary, when employees have been properly consulted and when attempts to look for alternative solutions have been made.
As an exception, if any employees have under two years of service, then it is usually permissible to end their contract with notice and offer them employment on the new terms and conditions. However, there can still be risks with this and advice should always be sought first.
Note: the period of two years, after which employees gain the right not to be unfairly dismissed, is set to be reduced to six months from the beginning of 2027.
Legal Changes from 1st January 2027
From January 1st, 2027, employers will not be able to use the threat of dismissal as a bargaining tool to get any employee to accept changes to the fundamental aspects of their contract of employment. These will be known as ‘restricted variations’ and will include pay, pension, annual leave, working hours (both the number of hours and the shift pattern) and the introduction of variation clauses that would allow an employer to change terms and conditions in the future. It is likely not to include place of work or job duties although, as always, any changes to these must be reasonable.
Employers will also not be able to replace current staff with less skilled and lower-paid workers a, such as casual workers or agency workers – a practice informally known as ‘fire and replace’.
Dismissals which are made because an employee did not agree to a ‘restricted variation’ of their contract of employment, or if the employer did ‘fire and rehire’ or ‘fire and replace’, will be held to be automatically unfair following the changes.
Such practices will be permitted in exceptional circumstances when a business is in immediate and serious financial danger and no other reasonable alternative solution was available, but this is likely only to apply in a small minority of situations.
As an alternative to fire and rehire, employers may consider voluntary redundancy, internal restructuring or trial periods of the proposed arrangement.
If you have any queries in relation to this or any other employment law issue, please email tcms@thomas-carroll.co.uk and our employment specialists will be happy to help.
