Understanding 'Fire and Rehire' in the UK: What It Is and What's Changing in 2025
Understanding 'Fire and Rehire' in the UK: What It Is and What's Changing in 2025
The practice of “fire and rehire” has been a contentious issue in the UK employment landscape. With the introduction of the Employment Rights Bill in October 2024, significant changes are on the horizon for this practice. This article aims to explain what “fire and rehire” entails and outline the forthcoming changes set to take effect in 2025.
What Is 'Fire and Rehire'?
“Fire and rehire,” also known as dismissal and re-engagement, refers to the process where an employer terminates an employee’s contract and offers re-employment under new, often less favorable, terms. This tactic is typically employed when changes to employment terms cannot be agreed upon through consultation.
While not illegal, this practice has been criticised for undermining workers’ rights and job security. High-profile cases, such as the P&O Ferries incident in 2022, have brought this issue to the forefront, prompting calls for legislative reform.
Current Legal Framework
Under existing UK law, employers can legally dismiss and rehire employees, provided they follow a fair procedure and have a legitimate business reason. However, this approach carries risks, including potential claims for unfair dismissal and reputational damage.
In July 2024, a statutory Code of Practice on dismissal and re-engagement was introduced, emphasizing that such measures should be a last resort after meaningful consultation. While the code itself is not legally binding, failure to adhere to it can influence tribunal decisions and lead to increased compensation awards.
Upcoming Changes in 2025
The Employment Rights Bill introduces several key reforms aimed at curbing the misuse of “fire and rehire” practices:
1. Automatic Unfair Dismissal
Dismissing an employee to re-engage them on new terms will be considered automatically unfair, except in cases where the employer can demonstrate that the changes are essential to prevent insolvency. This sets a high threshold for justification.
2. Enhanced Penalties
From January 2025, employment tribunals will have the authority to increase compensation awards by up to 25% if an employer unreasonably fails to comply with the statutory Code of Practice during dismissal and re-engagement processes.
3. Stricter Consultation Requirements
Employers will be required to engage in thorough and meaningful consultations with employees or their representatives before making any contractual changes. This includes providing clear information, exploring alternatives, and allowing sufficient time for discussions
implications for employers
These reforms significantly limit the circumstances under which “fire and rehire” can be used, compelling employers to seek alternative methods for implementing contractual changes. Failure to adhere to the new regulations can result in legal challenges and financial penalties.
Employers are advised to review their policies and consult legal experts to ensure compliance with the forthcoming changes.