The Government consults on fire and rehire proposals under the Employment Rights Act 2025

The Government has published various consultation papers on Employment Rights Act 2025 ('ERA 2025'). We focus on the consultation on aspects of the fire and rehire proposals, which closes on 1 April 2026.  

The concept of 'fire and rehire' that the Government is addressing is described in its introduction to the consultation as 'the process of an employer dismissing an employee and then re-employing them (or someone else) under a new contract, usually with less favourable terms and conditions'. 

Concerns have been raised, particularly among employers, about the extent to which the Government is attempting to restrict the ability of employers to vary employees' terms and conditions.  

The consultation builds on the distinction the Government introduced during the passage of the Employment Rights Bill through Parliament between 'restricted' variations to pay, hours and holiday, where a fire and rehire scenario would lead to automatically unfair dismissals and 'non-restricted' variations to other terms and conditions where dismissals resulting from a fire and rehire process would not be automatically unfair (but might be unfair on ordinary principles).   

For the moment, the Government is consulting about just two aspects of the proposed changes – (1) employment expenses and benefits and (2) shift patterns. Specifically, it is asking which aspects of expenses, benefits, and shift changes should constitute restricted variations under ERA 2025, and which should be left to agreement between employers and employees. 

Expenses and benefits

In relation to expenses and benefits, the consultation paper acknowledges that non-contractual benefits will be outside the scope of the legislation, but poses the question whether other kinds of expense or benefit related to pay should also be excluded. 

The Government proposes two options but states that it is open to alternative views. 

• Option 1: All expenses and benefits or payments in kind are excluded.
• Option 2: All expenses and benefits or payments in kind are excluded apart from certain types of share scheme, travel expenses and accommodation.

The paper then asks a series of detailed questions about the options under discussion. It is clear that the Government will use the responses it receives to inform the content of the detailed regulations it proposes to introduce to bring this part of the legislation fully into force.

Shift patterns

The consultation paper acknowledges that 'discussions with business and union stakeholders have highlighted a number of challenges with attempting to specify restricted variations to shift patterns in regulations'. The paper goes on to discuss these policy challenges in some depth. In light of the potential difficulties, the Government is now proposing two options but states that it is open to alternative views:

• Option 1: Shift changes from day to night working (or vice versa), and weekday to weekend working (or vice versa), will be restricted variations. This would enable only the most extreme shift changes to constitute restricted variations. 
• Option 2: No types of shift pattern changes related to the timing or duration of a shift are in scope of the restricted variation. 

The consultation paper states that the Government's current preference is for option 1. However, again, it asks a series of detailed questions which will inform the detailed regulations that bring the new law into force. 

Comment

This consultation exercise suggests that the Government may now be recognising that the proposed changes to the law in this area may have unforeseen consequences. It acknowledges that employers may need sufficient latitude to respond to changes in the business environment with appropriate amendments to terms and conditions of employment.

Employers should note that the changes to the law on variation of contracts will not prevent them from relying on existing variation clauses in staff contracts, and employers should consider reviewing their employment documentation well ahead of the start of 2027 to ensure that they have sufficient flexibility in place. An attempt to impose a variation clause after the new law is introduced will also be a restricted variation, so that any attempt to force through such a change via dismissal and re-engagement will be automatically unfair.

The Government also intends to update the Code of Practice on dismissal and re-engagement issued by the Secretary of State under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992 and to launch a public consultation on the revised version of this code later in 2026.

We will keep you updated as further developments take place.

If you have any views that you would like the employment team to express on your behalf during this consultation exercise, please don't hesitate to get in touch. If you would prefer to respond directly, you can do so using this link.

This article was authored by Christina Morton, senior knowledge lawyer and Melissa Paz, special counsel, in the UK employment team.