Few employment practices provoke as much debate as "fire and rehire" - the controversial tactic where employers dismiss staff and immediately offer to re-engage them on less favourable terms. Under…
Few employment practices provoke as much debate as "fire and rehire" - the controversial tactic where employers dismiss staff and immediately offer to re-engage them on less favourable terms. Under fire and rehire UK legal frameworks, this manoeuvre sits in a genuinely uncomfortable space: technically permissible in narrow circumstances, yet increasingly constrained by statute, case law, and a new statutory Code of Practice that tribunals must now take into account.
Why does this matter? Because the consequences cut both ways. Workers can lose pay, pensions, holiday entitlements, and hard-won contractual protections overnight. Employers, meanwhile, face reputational damage, industrial action, and the risk of protective awards worth up to 25% uplift on compensation where the Code is ignored.
Whether you're an HR leader navigating restructuring pressures or an employee handed a "sign or leave" ultimatum, understanding your rights and obligations under the current UK regime isn't optional - it's essential to protecting your position.
What Is fire and rehire UK legal?
Fire and rehire, known formally as "dismissal and re-engagement," is the practice where an employer terminates an employee's contract and offers to re-employ them on new, usually less favourable, terms. It's a tactic typically used when negotiations over changes to pay, hours, benefits, or working conditions reach an impasse.
So, is fire and rehire UK legal? Yes, but with significant caveats. The practice remains lawful in England, Scotland, and Wales, provided employers follow proper procedures. However, the legal landscape has tightened considerably. Since 18 July 2024, a statutory Code of Practice on Dismissal and Re-engagement is in force, giving tribunals the power to increase compensation awards by up to 25% where an employer unreasonably fails to comply.
The scope covers virtually all employment relationships where a contractual change is sought, from small businesses adjusting shift patterns to large corporations restructuring pay. Employers must genuinely consult, explore alternatives, and treat dismissal as a last resort rather than an opening gambit. Failure to do so risks unfair dismissal claims, protective awards for collective redundancy breaches, and reputational damage.
The context matters too. High-profile cases like P&O Ferries in 2022 sparked public outrage and prompted Labour's Employment Rights Bill, which proposes to make fire and rehire automatically unfair except in genuine financial distress scenarios. For workers facing this situation, understanding your rights is crucial. For employers, the message is clear: while the tool exists, the bar for using it lawfully has risen sharply, and the consequences of getting it wrong are increasingly severe.
Key Benefits of fire and rehire UK legal
Fire and rehire - formally known as "dismissal and re-engagement" - remains a lawful, if controversial, tool available to UK employers when contract renegotiations reach an impasse. Used properly, and within the boundaries set by the Employment Rights Act 1996 and the statutory Code of Practice that came into force in July 2024, it offers several genuine advantages for businesses navigating difficult commercial realities.
Business survival and continuity. When trading conditions shift sharply, the ability to adjust terms and conditions can be the difference between preserving jobs and closing sites entirely. For employers facing collapsing margins, restructuring pension schemes, or absorbing regulatory change, lawful dismissal and re-engagement provides a route to keep the workforce intact rather than pursuing redundancies.
Legal certainty when consultation stalls. Meaningful consultation must always come first, but where employees will not agree to necessary changes, the process gives employers a defined lawful mechanism to implement them. Following the Code closely reduces the risk of successful unfair dismissal claims and the new 25% uplift on tribunal awards for non-compliance.
Contractual clarity going forward. Rather than relying on ambiguous variation clauses or informal changes that may be challenged years later, re-engagement on fresh written terms establishes a clean contractual position. Both parties know precisely where they stand.
Preserving employment relationships. Unlike outright redundancy, employees are offered continued work - often on terms that, while less favourable in some respects, keep them in a job, protect continuity of service for many statutory purposes, and maintain the skills base the employer has invested in.
A last-resort framework, not a first move. Perhaps the most understated benefit is structural: the legal framework itself forces employers to exhaust alternatives, document reasoning, and consult genuinely. Handled with care, the process can produce a workable outcome where negotiation alone has failed.
How fire and rehire UK legal Works
Fire and rehire, formally known as "dismissal and re-engagement," is a controversial but currently lawful practice in the UK where an employer terminates an employee's contract and offers to re-engage them on new, often less favourable, terms. Understanding the mechanics matters, because getting the process wrong exposes employers to significant tribunal claims - and leaves employees uncertain of their rights.
Step 1: Attempting to vary the contract by agreement. Before anything drastic, the employer must first try to negotiate changes. This means consulting with affected staff (and recognised trade unions, where relevant), explaining the business rationale, and giving employees a genuine opportunity to respond.
Step 2: Meaningful consultation. If 20 or more employees at one establishment are potentially affected, collective consultation obligations under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 kick in - 30 days' minimum, or 45 days for 100 or more. Skipping this can trigger protective awards of up to 90 days' pay per employee.
Step 3: Issuing notice of dismissal. If agreement can't be reached, the employer terminates the existing contract by giving contractual or statutory notice. The dismissal must be for a potentially fair reason, typically "some other substantial reason" (SOSR) under section 98(1)(b) of the Employment Rights Act 1996.
Step 4: Offering re-engagement. Alongside the dismissal, the employer offers a new contract on the revised terms. Employees can accept, negotiate further, or refuse and treat themselves as dismissed - potentially pursuing unfair dismissal claims if they have two years' service.
Step 5: Applying the Statutory Code. Since July 2024, employers must follow the Code of Practice on Dismissal and Re-engagement. Tribunals can uplift compensation by up to 25% where employers unreasonably fail to comply, making procedural care more important than ever.
Common Questions About fire and rehire UK legal
Is fire and rehire actually legal in the UK?
Yes, but with significant caveats. Dismissing an employee and offering re-engagement on new terms remains lawful, however since 18 July 2024 employers must follow the statutory Code of Practice on Dismissal and Re-engagement. Tribunals can uplift compensation by up to 25% where the Code is unreasonably ignored.
When can my employer use fire and rehire?
Only as a genuine last resort after meaningful consultation. Employers should first attempt to reach agreement through negotiation, explore alternatives, and clearly explain the business reasons for the proposed changes. Using it as an opening tactic or negotiating threat is likely to be unlawful.
What claims can I bring if I'm fired and rehired unfairly?
You may have grounds for unfair dismissal (if you have two years' service, dropping to day-one rights under proposed reforms), breach of contract, or discrimination claims where protected characteristics are involved. Collective consultation failures can trigger protective awards of up to 90 days' pay per affected employee.
Do I have to accept the new terms?
No. You can refuse, but this may result in dismissal. Alternatively, you might accept "under protest" and pursue a claim, or negotiate amendments. Taking early legal advice is essential before responding.
Does the Code apply to small changes?
The Code applies whenever dismissal is a realistic possibility if employees don't agree, regardless of the size of the proposed change. Even relatively minor variations can trigger its requirements if refusal risks termination.
Conclusion
Fire and rehire remains one of the most contentious practices in UK employment law. While it isn't outright banned, the legal and reputational risks have grown sharply. The statutory Code of Practice, introduced in July 2024, now requires employers to treat dismissal and re-engagement as a genuine last resort, with tribunals empowered to uplift compensation by up to 25% where the Code is ignored. The Employment Rights Bill signals even tighter restrictions ahead.
The key takeaways are straightforward. Consult meaningfully and early. Document every alternative you've explored. Never use dismissal as a negotiating tactic. And recognise that unfair dismissal claims, protective awards, and public scrutiny can far outweigh the short-term savings of forcing through contractual changes.
If you're an employer weighing contract changes, or an employee facing a "sign or leave" ultimatum, seek specialist employment law advice before taking any further step. Early guidance protects your position and preserves your options.
Learn more about Disciplinary and Dismissal Procedures.
