Changing employee contracts has always been a sensitive area for employers. Whether driven by economic pressures, organisational restructuring or operational requirements, contract changes can create significant legal and employee relations challenges. One practice that has attracted considerable attention in recent years is known as "fire and rehire". The Employment Rights Act 2025 introduces new restrictions designed to make the practice significantly more difficult for employers to use. For business owners, directors, HR professionals and managers, understanding these changes will be essential. In this guide, we explain what fire and rehire means, what is changing under the Employment Rights Act 2025 and how employers can prepare.
Fire and rehire refers to a situation where an employer dismisses an employee and offers them re-employment on new contractual terms. Employers have sometimes used this approach when employees refuse proposed changes to pay, working hours, benefits, job duties or other contractual arrangements. Although the practice has been lawful in certain circumstances, it has generated significant controversy, particularly where employees have felt pressured into accepting less favourable terms. The Government's position is that stronger protections are needed to prevent misuse of the practice.
The Employment Rights Act 2025 aims to provide employees with greater protection against dismissal linked to contract changes. The Government believes that employees should not be forced to choose between accepting reduced terms and losing their jobs, except in very limited circumstances. The reforms form part of the wider "Plan to Make Work Pay" programme and are intended to strengthen workplace security and fairness.
Under the planned reforms, dismissing employees because they refuse proposed contract changes is expected to become automatically unfair in most situations. This means employers may face increased legal risks if they seek to terminate employment and re-engage employees on different terms. The Government has indicated that only limited exceptions may apply where businesses can demonstrate serious financial difficulties that threaten organisational viability. The overall intention is to make fire and rehire a last resort rather than a routine management tool.
Many businesses occasionally need to update employment contracts to reflect changing operational requirements.
Examples may include:
Changes to working hours
Shift pattern adjustments
Changes in work location
New job responsibilities
Restructuring programmes
Business acquisitions
Organisational transformation
The new rules do not prevent employers from making contractual changes. However, they place greater emphasis on consultation, agreement and employee engagement. Employers will need to demonstrate that they have followed fair processes and explored alternative solutions before considering dismissal.
While the changes apply across all sectors, organisations operating large workforces or complex operational structures may face particular challenges.
This includes:
Warehousing and logistics
Construction
Manufacturing
Security services
Retail
Hospitality
Care services
These sectors often rely on flexible workforce arrangements and may need to make operational changes in response to commercial pressures.
The best approach is to focus on consultation and engagement.
Employers should communicate openly with employees, explain the reasons for proposed changes and provide opportunities for meaningful discussion. Where possible, organisations should seek voluntary agreement rather than imposing contractual changes. Clear communication often reduces resistance and helps maintain positive employee relations during periods of change.
The introduction of the new rules provides an opportunity for employers to review their workforce management practices.
Businesses should consider:
Reviewing employment contracts
Assessing change management procedures
Training managers on consultation requirements
Updating HR policies
Strengthening employee communication processes
Reviewing redundancy and restructuring procedures
Employers that invest in planning and communication are likely to be better positioned to navigate future workforce changes.
Managing workplace change requires more than understanding the law. Managers and leaders need the skills to communicate effectively, engage employees and manage organisational change professionally.
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This article is based on guidance and implementation plans published by the UK Government and ACAS.
UK Government – Employment Rights Act Implementation Timeline
UK Government – Employment Rights Act Factsheets
https://www.gov.uk/government/publications/employment-rights-bill-factsheets
ACAS – Changing Employment Contracts
https://www.acas.org.uk/changing-an-employment-contract
The information in this article is intended as general guidance for employers and managers. It should not be relied upon as legal advice. Employment law is subject to change, and the application of legislation may vary depending on individual circumstances.
If you are unsure how the Employment Rights Act 2025 may affect your organisation, we recommend seeking appropriate legal or professional advice.