Introduction
This checklist provides guidance to in-house counsel, private practice lawyers and human resources professionals working in England, Wales and Scotland (GB) on the issues to take into account when considering a ‘fire and rehire’ exercise (also known as ‘dismiss and rehire’ or ‘dismiss and re-engage’), including the requirements of the statutory code on fire and rehire. This checklist does not apply to Northern Ireland, where employment law is devolved to the Northern Ireland Assembly.
This checklist addresses the following steps:
- Understand the key principles of the statutory code on fire and rehire
- Consider the strategic implications of initiating fire and rehire
- Execute the fire and rehire process
- Ensure compliance with legal and procedural safeguards
This checklist can be used in conjunction with How-to guide: How to carry out a fair dismissal on the grounds of SOSR (UK) and Quick view: Collective redundancy consultation (UK).
Employers should be aware that the Employment Rights Bill 2024, introduced on 10 October 2024, aims to significantly enhance worker protections in the UK. Key provisions include granting day-one rights for unfair dismissal, paternity, parental, and bereavement leave, changes to sick pay and flexible working rights, protections against zero-hours contracts and restrictions on the use of ‘fire and rehire’ practices. New legislation will be introduced throughout 2025 and 2026. Further information can be found at UK Parliament: Employment rights bill and Employment Rights Bill: factsheets.
Step 1 – Understand the key principles of the statutory code on fire and rehire
| No. | Task |
| 1.1 | Understand the key principles and guidelines in the Code |
| 1.2 | Understand the legal implications of the Code for employers |
Step 2 – Consider the strategic implications of initiating fire and rehire
| No. | Task |
| 2.1 | Assess the need for fire and rehire |
| 2.2 | Review existing employment contracts |
| 2.3 | Consider alternatives to fire and rehire |
| 2.4 | Consider risk management and mitigation |
Step 3 – Execute the fire and rehire process
| No. | Task |
| 3.1 | Develop a clear and justifiable business case |
| 3.2 | Form clear communication strategies at an early stage |
| 3.3 | Carry out a negotiation and consultation process |
| 3.4 | Dismissal process and offer of new terms |
Step 4 – Ensure compliance with legal and procedural safeguards
| No. | Task |
| 4.1 | Internal procedures |
| 4.2 | External resolution mechanisms |
Explanatory notes
Fire and rehire has emerged as a contentious employment practice. It refers to the strategy where employers terminate employees’ employment contracts, only to rehire them immediately under altered, often less favourable, conditions.
Overview
The practice of fire and rehire is not explicitly prohibited by law; however, it poses reputational risks and potential legal challenges for the employer. While some employers argue that fire and rehire is a necessary step for survival, particularly in a rapidly changing market or when faced with dire financial circumstances, it is often criticised for undermining employees’ rights and security. It typically comes into play when an employer wishes to implement changes to the terms and conditions of employment that employees are unwilling to accept, such as reductions in pay, alterations to working hours or changes in benefits.
Some high-profile examples of fire and rehire in recent years include:
- Tesco’s attempts to use fire and rehire to remove a pay arrangement for warehouse operatives;
- P&O’s dismissal of 800 crew members in 2022;
- British Airways attempts to reduce pay using fire and rehire in 2020 during the covid-19 crisis; and
- British Gas’s attempts in 2020 / 2021 to use fire and rehire to increase working hours.
Legal framework
The UK government introduced a statutory code of practice on dismissal and re-engagement (the Code), which came into force on 18 July 2024, aiming to curtail the misuse of fire and rehire practices by employers.
The Code provides clear guidelines on how employers should conduct themselves when seeking to alter the terms of employment contracts using a fire and rehire approach. An unreasonable failure to comply with the Code can lead to the potential variation of various employment tribunal awards by 25%.
The Code does not render fire and rehire illegal, but it embodies a clear stance against using it as a default negotiating strategy and emphasises the necessity of employers engaging in good faith negotiations to reach an agreement without resorting to dismissals. In situations when fire and rehire is considered by employers, the new Code necessitates employers to seek advice from Acas.
Note that the Employment Rights Bill 2024 proposes to make it automatically unfair to dismiss an employee for refusing to vary the terms of their employment, or because the employer intends to employ another person on varied terms, unless the employer can show they were acting in response to financial difficulties affecting their ability to carry on business as a going concern, and that they could not avoid the need to make the variation by other reasonable means. A tribunal will also still need to consider whether the dismissal was fair within the meaning of section 98 of the Employment Rights Act 1996 (ERA 1996) (see How-to guide: How to carry out a fair dismissal on the grounds of SOSR).
A separate consultation on fire and rehire ended on 2 December 2024. The consultation asked for views on increasing the maximum period of protective awards (see 3.3.1 below) and adding interim relief to collective redundancies and unfair dismissal in cases of fire and rehire. See Consultation on strengthening remedies against abuse of rules on collective redundancy and fire and rehire for more details.
Employment laws that are relevant in the context of fire and rehire include:
- unfair dismissal legislation under section 98 of the ERA 1996 (see How-to guide: How to carry out a fair termination of employment (UK) and How-to guide: How to carry out a fair dismissal on the grounds of SOSR (UK) for further information); and
- collective consultation requirements under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) (see 3.3.1 below).
The main legal incentives for employers in carrying out a lawful fire and rehire exercise are:
- to alter employees’ terms of employment, where the employees are unwilling to agree to the change; and
- to enable the employer to fairly dismiss employees without being liable to pay redundancy payments or unfair dismissal compensation, by relying on the ground of Some Other Substantial Reason (SOSR) to justify the dismissals (regardless of whether or not the employees accept the offer of re-employment on new terms). For further information see How-to guide: How to carry out a fair dismissal on the grounds of SOSR (UK).
Employers should keep in mind that a fire and rehire process is different to a redundancy process, as with a fire and rehire process it is not purported that the employees’ roles are redundant, but rather that the employer wants to change the employees’ terms of employment.
For further information about redundancy, see Checklist: Conducting a redundancy exercise (UK).
Step 1 – Understand the key principles of the statutory code on fire and rehire
1.1 Understand the key principles and guidelines in the Code
A central tenet of the Code is that fire and rehire should be a last resort, pursued only after other options have been exhausted. The Code requires employers to be transparent with employees through the following mechanisms:
- engaging with employees and their representatives early on;
- sharing all information as far as reasonably possible; and
- engaging in genuine consultation aimed at reaching an agreement.
The Code discourages employers from using dismissal threats as a negotiating tactic and requires employers to treat consultation seriously, giving due consideration to alternative proposals from employees or their representatives. Before raising the prospect of dismissal, employers are urged to contact Acas for advice, a step aimed at promoting fair and responsible employment practices.
1.2 Understand the legal implications of the Code for employers
The Code aims to ensure fair and balanced employer–employee negotiations, highlighting a commitment to protecting workers while maintaining flexibility for businesses.
While not legally binding, the Code carries significant weight in legal proceedings. Employment tribunals will take the Code into account when adjudicating relevant claims. Where employers are found to be unreasonably non-compliant with the Code, the tribunal can adjust compensation in relevant claims (such as unfair dismissal claims) by up to 25%.
It is important to note that the Code does not remove existing legal obligations related to fire and rehire practices, such as collective redundancy consultation obligations (see 3.1.1 below). The Code can be seen as a lens through which these obligations will be viewed, and in some instances increases the obligations on employers.
The Code’s impact may necessitate employers to thoroughly review their strategies and practices related to contract changes, ensuring alignment with the expectations of the Code.
Step 2 – Consider the strategic implications of initiating fire and rehire
2.1 Assess the need for fire and rehire
Before considering a fire and rehire exercise, employers should assess the necessity of such a step in detail. The underlying motivation of employers is often to enact contractual changes – such as changes to working hours, shift patterns, pay or benefits – when mutual agreement with employees is not forthcoming. This motivation could be due to a variety of needs, such as reducing operational costs, aligning with market conditions or adapting to new business strategies. The covid-19 pandemic highlighted such needs, as many employers sought to modify employment terms due to the sudden shift to remote work and the ensuing economic uncertainty (see for instance British Airways’ attempt at fire and rehire in 2020 / 2021 referenced in the Overview above).
2.2 Review existing employment contracts
Employers should review the existing employment contracts to identify any clauses that could allow for variation within the current terms, and therefore avoid the need for a fire and rehire exercise.
When reviewing employment contracts, employers should look for specific clauses related to variations in the contract, and how these align with the proposed changes. This may include clauses on working hours, remuneration, location of work and other fundamental terms. Clauses that allow for unilateral changes by the employer should be handled with caution, and legal advice is often recommended to navigate these changes effectively.
While flexibility clauses in employment contracts may permit minor changes, they are unlikely to hold up for more substantial changes, such as significant pay reductions or changes to core working hours. Employers must also provide appropriate statutory or contractual notice prior to any changes.
2.3 Consider alternatives to fire and rehire
Fire and rehire should be a last-resort measure. Alternatives to it and measures to attempt before implementing it include seeking express agreements from employees to new terms of employment or implementing changes over time with the agreement of employees. Fire and rehire has drawn public and political criticism for what has been perceived as taking advantage of the covid-19 crisis to change employee terms unfairly.
2.4 Consider risk management and mitigation
The risks for employers associated with fire and rehire include legal challenges, reputational damage and strained labour relations. The introduction of the Code aimed to curb the unethical use of the practice by setting out clear expectations for employers.
Employers are advised to engage in open, transparent and early consultation with employees and to exhaust all other options before resorting to fire and rehire. Employers should also consider the impact of proposed changes on employees, especially those with protected characteristics (see Quick view: Protected characteristics under the Equality Act 2010 (UK)) and to think about providing additional support, such as longer notice periods or phased changes, to those affected.
Step 3 – Execute the fire and rehire process
3.1 Develop a clear and justifiable business case
Developing a clear and justifiable business case is the foundation of a fire and rehire process. Employers must be able to articulate the rationale behind the proposed changes, and detail how they are crucial for the business’s survival or competitiveness. For instance, demonstrating the impact of operational disruptions, increased supply costs or revenue loss. The business case should be robust, detailing how proposed changes will alleviate the business’s challenges and should be supported by factual evidence such as financial reports.
The business case should comprehensively outline the necessity of contractual changes and be rooted in the current and projected state of the business. This could include an analysis of cost savings, operational efficiencies or market alignment that the proposed changes aim to address.
3.2 Form clear communication strategies at an early stage
Clear communication strategies ensure that the affected employees understand the reasons behind the proposed changes and the implications for their roles. As with all consultation exercises it is important to communicate early and openly with employees, providing as much detailed information as possible about the proposed changes, their rationale and the potential impact on the workforce. Employers often make a group announcement to all affected employees or their representatives, followed up by written confirmation of the proposed changes. It is crucial that employers state that the changes are only proposed, pending a consultation process.
3.3 Carry out a negotiation and consultation process
The Code emphasises the importance of meaningful consultation with employees and unions, discouraging fire and rehire being raised unreasonably early as a threat in the negotiations, and promoting genuine attempts to find an alternative resolution beforehand. The Code also requires employers to contact Acas. The goal is to reach an agreement or compromise, thus avoiding the need for fire and rehire.
If there is no trade union then consultation should be with an existing employee body or employee representatives chosen for this purpose or individually with the employees themselves. This is subject to specific requirements under collective consultation rules covered in 3.3.1 below.
3.3.1 Collective consultation under the Trade Union and Labour Relations (Consolidation) Act 1992
Currently, collective consultation is required by the TULRCA when 20 or more people are at risk of being dismissed as redundant within a 90-day period from a single establishment (section 188, TULRCA). When collective consultation rules apply, employers must carry out consultation in accordance with the specific requirements and timescales set out in TULRCA.
The collective redundancy consultation obligations apply in fire and rehire situations due to the wider definition of redundancy under TULRCA than under the general unfair dismissal law found in the ERA 1996. Under TULRCA, ‘dismissal as redundant’ is defined widely as ‘dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related’ (section 195(1), TULRCA), meaning that the collective consultation requirements are triggered by a fire and rehire exercise. For further information about collective consultation under TULRCA, see Quick view: Collective redundancy consultation (UK). Since 20 January 2025, the tribunal’s power to vary compensation is applied to protective awards made where there has been a failure to comply with the Code.
3.3.2 Requirements of the Code
The Code effectively introduces collective information and consultation obligations for the first time in smaller-scale fire and rehire exercises, as there is no minimum threshold over which consultation must take place. The requirements for consultation under the Code are less prescriptive than those found in TULRCA, and relevant information to share will include the nature of change, the employees affected, the reasons for the change, anticipated timelines and alternatives that have been considered. Employers who are carrying out a fire and rehire exercise for more than 20 employees will need to ensure compliance with the requirements of both TULRCA and the Code.
3.3.3 Aims of consultation
The negotiation and consultation process should be approached with the intention of reaching an agreement. It should involve sharing detailed information and listening to feedback from employees or their representatives. This information sharing and consultation is ongoing and should start as early as reasonably possible.
3.3.4 Set realistic timelines and expectations
It is crucial to set realistic timelines for consultations, with clear deadlines for reaching an agreement. Employers should warn employees about the possibility of fire and rehire only as a last resort and not as a negotiating threat.
The employer should re-examine its proposal for fire and rehire after information sharing and consultation, and if it is clear that proposed changes will not be agreed. This will require consideration of the feedback obtained, the expected consequences (negative and positive) of any change and any discriminatory impact assessments.
3.4 Dismissal process and offer of new terms
If agreement is not reached within the consultation period, only then should the fire and rehire dismissal process begin. Notice should be given to each individual employee in writing, and employers will need to follow the usual steps for employee dismissals, including:
- giving the necessary contractual or statutory notice or making a payment in lieu of notice;
- complying with any other requirements of the employment contract or related workplace policies; and
- giving the employee a right of appeal against their dismissal.
Written offers of the new terms should be made alongside notices of dismissals.
Step 4 – Ensure compliance with legal and procedural safeguards
It is important for employers to have established internal procedures for handling appeals, disputes and grievances that may arise from the fire and rehire process. This includes a clear pathway for employees to express their concerns and for these to be fairly addressed. Employers must engage in meaningful consultations, exploring all alternatives to fire and rehire, and conduct these processes in good faith with a genuine attempt to reach an agreement.
4.1 Internal procedures
Internal dispute resolution procedures should be transparent and accessible to all employees. These procedures often involve a series of meetings and discussions, and may also include mediation processes to resolve conflicts without escalating them.
4.2. External resolution mechanisms
If internal procedures do not resolve the issue, employers and employees can turn to external resolution mechanisms. This may include seeking advice from Acas or ultimately, disputes may be resolved through employment tribunals, where, as explained above, compensation can be varied by 25% for unreasonable breaches of the Code.
Additional resources
Related Lexology Pro content
Code of practice: On dismissal and re-engagement
How-to guides:
Overview of employment law
How to carry out a fair termination of employment
Overview of workplace discrimination and harassment law
How to avoid disability discrimination in the workplace
How to comply with the duty to make reasonable adjustments in the workplace
Understanding the legal protections for whistleblowers
The framework for resolving employment disputes in England and Wales
Checklists:
Identifying, reviewing and updating the terms of an employment contract
Drafting a staff handbook
Employment law considerations during a recruitment process
Determining the difference between an employee, a worker and an independent contractor
Carrying out a disciplinary process
Managing multi-jurisdictional redundancies in Europe
Employment, immigration and tax considerations when dealing with cross-border working
Carrying out a capability process
Conducting a redundancy exercise
Carrying out a TUPE transfer
Quick views:
Protected characteristics under the Equality Act 2010
Key players in collective labour law – UK, Germany, Italy, France and the Netherlands
Collective redundancy consultation
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