Employment Rights Act 2025: New fire and rehire rules expected in 2027

The Government has launched a consultation on a revised Code of Practice on Dismissal and Re-engagement (commonly known as fire and rehire), which will amend the current Code introduced in 2024.

The update will reflect the significant changes to dismissal and re-engagement provisions introduced by the Employment Rights Act 2025.

Under the new regime, it will be automatically unfair for an employer to dismiss an employee in order to impose certain changes to key contractual terms, unless a limited exemption applies in cases of serious financial difficulty.

The prohibited ‘restricted variations’ include:

• Reductions in pay;
• Changes to contractual working hours;
• Reductions in holiday entitlement;
• Changes to pension arrangements; and
• Certain specified changes to shift patterns.

It will also be automatically unfair to replace an employee with a non-employee doing substantially the same role.

Employers seeking to implement other contractual changes through dismissal and re-engagement will also face enhanced procedural requirements in order for any resulting dismissal to be considered fair.

The draft Code of Practice states that the changes to dismissal and re-engagement will take effect in March 2027, with the 2024 Code being withdrawn in March 2027, despite previously being expected to be put in place in January 2027. It is anticipated that the new Code will not come into force until Summer 2027, resulting in a significant period during which no Code will be in effect.

The draft Code states that certain changes to shift patterns will constitute restricted variations, with further details to be ‘specified in regulations’. The draft Code also states that further guidance will be published on the financial difficulties exemption, dealing with the variation of these difficulties across the private sector, public sector and within local authorities.

Need advice on fire and rehire?

The proposed changes could have significant implications for employers planning contractual changes. Contact our employment law team for advice on managing contractual variations, understanding your obligations and preparing for the forthcoming changes.

This article was written by Gabrielle Scriven.