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In 2022, P&O Ferries dismissed around 800 staff without notice and replaced them with cheaper agency labour on the same day. The public and political backlash that followed is a big part of why fire and rehire reform exists at all.<\/p>\n
But the government\u2019s own data<\/a> tells a more precise story than one headline case. An estimated 12,100 employers use fire and rehire each year, affecting around 125,000 workers<\/strong>, a small minority of UK employers, but not a small number of people. And it doesn\u2019t land evenly: a 2021 TUC poll, cited directly in the government\u2019s own analysis<\/a>, found Black and Minority Ethnic workers faced fire and rehire at nearly twice the rate of white workers<\/strong>, 15% compared with 8%.<\/p>\n From 1 January 2027<\/strong>, deliberately timed to land alongside the six-month unfair dismissal qualifying period, dismissing someone to force through certain contract changes becomes automatically unfair. This piece covers exactly what that means, what\u2019s still being decided, and what genuinely doesn\u2019t change.<\/p>\n Explore: Employment Law Changes 2026: HR Guidance on the Employment Rights Act 2025<\/a>, for the full picture this piece sits within.<\/p>\n Fire and rehire, dismissing someone and offering to re-engage them on different terms, or replacing them with someone else entirely, isn\u2019t unlawful today. It\u2019s currently permitted where an employer has a genuine business reason for the change and follows a fair process.<\/p>\n It\u2019s worth being honest about scale here too. The government\u2019s own analysis<\/a>, drawing on ONS data, found 63% of employers making changes to terms and conditions do so through consultation, negotiation, and voluntary agreement<\/strong>, while fewer than 1% resort to fire and rehire<\/strong>. This isn\u2019t a reform aimed at a widespread, everyday practice. It\u2019s aimed at a rarer, more coercive tactic, one still significant enough to affect an estimated 125,000 workers a year, that the current legal framework doesn\u2019t do enough to constrain.<\/p>\n That\u2019s the gap this reform closes. Not by banning contractual change altogether, but by making the most forceful version of it, dismissal used specifically to push through terms an employee wouldn\u2019t otherwise agree to, considerably harder to justify.<\/p>\n The reform doesn\u2019t treat every contractual change the same way. It draws a sharp line around a specific list of terms, called restricted variations<\/strong>, and dismissing someone to force through a change to one of these, or to replace them with someone else on those terms, is automatically unfair.<\/p>\n The government\u2019s own analysis<\/a> confirms restricted variations cover:<\/p>\n There\u2019s a real anti-avoidance detail worth knowing too, confirmed by Thompsons Solicitors<\/a>: inserting a brand-new flexibility clause into a contract, specifically to allow future changes to one of these terms without agreement, is itself treated as a restricted variation.<\/strong> An employer can\u2019t sidestep the protection by adding the right to make the change later instead of making it now.<\/p>\n DLA Piper confirms<\/a> no minimum length of service is required<\/strong> to bring this specific claim. It applies from day one.<\/p>\n The government\u2019s own data<\/a> shows where this actually bites: of the fire-and-rehire cases identified in its research, 20% involved changes to pay, 30% involved hours, and 20% involved leave entitlement<\/strong>, confirming this reform targets exactly the terms most commonly affected in practice, not a hypothetical edge case.<\/p>\n There is an exception, but it\u2019s built to be difficult to rely on, not a routine escape hatch.<\/p>\n Under the Act\u2019s new Section 104I(7)-(9)<\/a>, a dismissal to impose a restricted variation avoids being automatically unfair only if the employer can show:<\/p>\n Here\u2019s something worth knowing precisely: the government\u2019s own analysis<\/a> admits there\u2019s no official legal definition of \u201cfinancial difficulties.\u201d<\/strong> What exists instead are indicators, unpaid bills to suppliers, outstanding wages, an inability to meet routine financial obligations, that tribunals would look to as evidence. That\u2019s a genuinely open question still being worked out in practice, not a settled test with a clean checklist.<\/p>\n And even where an employer clears that bar, it isn\u2019t the end of the analysis. Make UK confirms<\/a> the dismissal still has to satisfy the ordinary unfair dismissal test on top<\/strong>, meeting the financial difficulties exemption removes the automatic finding against the employer, it doesn\u2019t hand them an automatic win.<\/p>\n Not every contractual change falls under this stricter regime. Lewis Silkin confirms<\/a> changes to location or job role and duties<\/strong> sit outside the restricted-variation list entirely.<\/p>\n That doesn\u2019t mean these changes are risk-free, though. Burges Salmon confirms<\/a> the Act introduces a bolstered ordinary unfair dismissal test<\/strong> specifically for this category. A tribunal weighing one of these dismissals now has to consider factors the law didn\u2019t previously require it to weigh so explicitly: whether the employer engaged in genuine, meaningful consultation, whether that consultation involved recognised trade unions or employee representatives where relevant, and what, if anything, the employer offered the employee in exchange for agreeing to the change.<\/p>\n The practical effect is a second, real tier of protection, less severe than automatic unfair dismissal, but no longer the relatively low bar it used to be. An employer changing someone\u2019s role or location without any real conversation first is taking on meaningfully more risk than it would have a year ago, even though the change itself was never on the restricted list.<\/p>\n The case for this reform isn\u2019t purely procedural. The government\u2019s own analysis<\/a> draws on a 2021 TUC poll of over 2,200 people in England and Wales, and the pattern it found is worth sitting with.<\/p>\n This isn\u2019t a coincidence of who happens to work in affected sectors. It reflects who tends to hold less bargaining power in the first place, younger workers, those in lower-paid roles, and workers already more exposed to precarious employment. A practice that relies on the threat of dismissal to force through worse terms will, by its nature, land hardest on the people least able to resist it.<\/p>\n That\u2019s the context worth keeping in view alongside the legal mechanics. This reform isn\u2019t closing a loophole nobody was using. It\u2019s addressing a practice that, however rare, has consistently fallen on the same groups of workers.<\/p>\n None of this requires waiting until the deadline to start preparing.<\/p>\n Knowing exactly where the line sits between a restricted and non-restricted variation, and building the documentation habits that hold up under either test, is exactly the kind of judgement this reform now demands. Avado\u2019s HR Compliance for Managers<\/a><\/strong> course, presented by employment law specialist Amanda Chadwick, builds that judgement directly, covering the Employment Rights Act 2025 changes as they land, including the ones still being finalised.<\/p>\nWhat \u201cFire and Rehire\u201d Actually Meant Before This Reform<\/h3>\n
The New Standard: Automatically Unfair for \u201cRestricted Variations\u201d<\/h3>\n
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The Narrow Exception (And Why It\u2019s Genuinely Narrow)<\/h3>\n
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What Happens With Non-Restricted Variations<\/h3>\n
Who This Actually Affects<\/h3>\n
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What Employers Should Do Before January 2027<\/h3>\n
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How Avado Can Help<\/h3>\n