Plan now for forthcoming changes to the practice of Fire & Rehire, says James Twine, partner and head of business services at South West law firm Wolferstans
From as early as October 2025, a major shake-up in UK employment law will make it far more difficult – and legally risky – for businesses to rely on the practice known as ‘Fire & Rehire’. This is where staff are dismissed and then re-employed on different terms, often used as a last resort when trying to change contracts and negotiations have failed.
Many smaller hospitality businesses, including takeaways and independent food chains, have historically relied on this method to adapt to changing economic pressures – adjusting staff hours, wages or roles when absolutely necessary. But a new Employment Rights Bill, currently passing through Parliament, is set to make these practices virtually unlawful in most cases.
What’s changing?
The key change is that dismissing someone purely for refusing to accept new contract terms will become automatically unfair. That means business owners will no longer be able to change contracts unilaterally – even in response to new demands, such as altered operating hours or staffing needs.
This could have a serious impact on businesses that rely on flexible staffing models, especially those using subcontracted workers for cleaning, kitchen support or deliveries. Going forward, any changes to terms must be agreed with the employee – not imposed.
Limited exceptions only
The law will still allow Fire & Rehire in very rare cases – but only if the employer is under severe financial strain. To qualify, the business must prove that:
- The changes are necessary to avoid insolvency or significant financial harm, and
- There was no reasonable way to avoid making those changes.
This is a very high bar and means that operational convenience or client demands won’t be enough. Business owners will need to show they’ve tried other options first – like voluntary agreements, cost-cutting, or reduced hours – and must fully document those efforts.
A government Code of Practice will also set out how businesses should consult with staff when contract changes are proposed. While not legally binding, tribunals can impose higher compensation if a business is found to have ignored the Code.
Risks of getting it wrong
Employers who try to sidestep the new rules – for instance, by disguising a Fire & Rehire as a redundancy – risk costly unfair dismissal claims. Even relying on old contract clauses that allow variations may not hold up in court. Replacing staff with agency workers to avoid the rules could also backfire, with added costs and possible union backlash.
What should you do now?
Small business owners should take urgent steps to prepare:
- Review staff contracts and identify any terms that may need changing in the next 12 months.
- Speak to a legal adviser to update variation clauses.
- Set up proper consultation processes so any future changes involve discussion, not imposition.
- Train managers on the new rules to ensure they’re followed properly.
In short, if you think you may need to change employee terms in future, act now – before it’s too late. The earlier you plan, the lower your risk.
