Key role for HR as employers prepare for UK’s ‘fire & rehire’ reforms

The House of Commons has rejected the House of Lords proposed amendments to the Employment Rights Bill with the government voting down changes it believed would weaken employment protections. ‘Day one’ unfair dismissal rights have been reinstated, with the Lords’ proposal of a six-month qualifying period rejected. Similarly, the Lords’ amendment to shift the obligation on employers to offer guaranteed minimum hours to one where the zero-hours workers were required to request minimum hours has also been rejected. The Commons decision also means the government’s planned fire and rehire restrictions remain intact and on track. That change is due in October next year which means there is a window of around 12 months for employers to build flexibility into their employment contracts while then law allows it. We’ll speak to an employment lawyer who is helping a number of clients with that exercise. 

Gillian Harrington flags this in her article for Out-Law, explaining how the change to fire and rehire is one of the most significant changes for employers because it goes directly to how organisations manage contractual change, particularly around pay, hours, pensions, and holidays. She highlights how employers have an opportunity to plan ahead, before the new law comes into force, by reviewing contracts to understand where, and how, flexibility can be built into them before the law changes.

A reminder of where we are now. The Statutory Code of Practice on dismissal and re-engagement has been in force since last summer. That Code doesn’t ban fire and rehire, but it sets out a clear process employers must follow, and tribunals can increase compensation by up to 25% if it’s ignored. However, from October 2026 the position is set to change significantly. Under the Employment Rights Bill it will be automatically unfair to dismiss employees in order to impose certain detrimental contractual changes – those covering pay, hours, shifts, holidays, and pensions. Employers will no longer be able to rely on dismissal and re-engagement to push through those kinds of changes, except in the rarest cases where the business is facing serious financial difficulty.

The Lords took the view those changes would make life too difficult for employers, especially SMEs, so they wanted to soften the original draft which had almost no distinction among types of variation, by carving out exceptions, narrowing the definitions, and possibly delaying or qualifying some protections. The government rejects that approach and is holding its line which is that fire and rehire shouldn’t be banned outright but must be curbed to stop employers ‘exploiting workers,’ as they put it. 

So let’s hear from Gillian on the changes and what HR can do to help the business prepare. Earlier she joined me by phone from Aberdeen. Given October 2026 seems a long way off, why act now?

Gillian Harrington: “Well, I think if we don't do something now – October 2026 is when it's likely to come into force, when fire and higher will no longer be and that's actually not that long away – and if companies do want to take steps to change their terms and conditions of employment, for example, that does take some time. If, for example, there's a unionised workforce, a collective agreement, then that will take time to discuss with the unions and also, as well, the whole process will take time if there is a requirement for employees to agree to certain changes to terms and conditions as well. Certainly, the types of clauses that we'd be looking for would be allowing variation clauses, for example. So specific variations of particular terms and conditions that a company might want to make a change to. So if you're wanting to change any pension contributions, for example, or benefits or life assurance, if you want to have a degree of flexibility in that it's very important to have a specific flexibility clause in the contract enabling you to do that otherwise you won't be able to make unilateral changes and when the changes to fire and hire come into force, employers will not be able to fire and unilaterally impose a condition and rehire employees on those three terms unless there's a specific exemption that applies.”

Joe Glavina: “What does a ‘future proof clause’ look like in practice, Gillian?”

Gillian Harrington: “It's very difficult to have a sort of completely future proof clause – a typical lawyer answer! What we would tend to see is allowing companies, for example, to amend, to withdraw, or to update, or change particular provisions. Now, there are certain terms where you won't be able to do that. So for example, salary is going to be really difficult one to get employees to agree to, and certainly in new contracts we would say that you should put specific variation clauses in particular terms which you might change. So working hours might be something potentially, workplace location and benefits. Again, that's something that's quite important to have that in. What I would say is that most contracts I see will have a sort of general flexibility and it's good to have that for certain terms that maybe are not material, but for material terms and conditions of employment you won't be able to use a general flexibility clause. So it is very important to make sure that if there's any terms you think in the future you might want to have the ability to vary then you should make sure that there's a specific variation clause in each of the sections in the employment contract relating to it.”

Joe Glavina: “So if you're advising clients to look at this now and to consider varying contracts while they have the chance, how do you persuade staff to sign up because, of course, they could simply refuse couldn’t they?”

Gillian Harrington: “Absolutely. So I think messaging is the most important thing. So I think that the reasons why you're making those changes for existing contracts. It’s easy doing it for a new contract, you can put those clauses in now, but for existing staff members unless you've already got a variation causing their contract obviously you'll be wanting to change that and put that in place soon and you would be putting the messaging across to employees. That might involve some sort of sweetener, for example, an increase in other terms, for example, or it may be for business reasons, for example, there might be a need to avoid redundancies and that's why those changes are being made. It’s really important in terms of getting the message across to employees to consult with them to make sure that they are on board with the changes and they're able to put forward any views as well before just putting those changes across. I would be careful if there are unions because obviously you can't make any changes to any terms and conditions covered by a collective bargaining agreement because that would be an inducement to make those changes. So it's important, again, to get the unions on board at the outset and that is why it is really important to be looking at this now because these processes are not quick, they will take some time. So it is therefore really important to be thinking about it now and if there are any changes that you need to be putting in place, putting that in place now. What we would always say in terms of fire and rehire is it is always very much the last resort and it would only be employed if there's a stage where you've got a term and condition that employees are not agreeing to and you are reaching a stalemate position where you're not getting the agreement of all employees. It may be then that you might potentially fire an employee and then offer new terms to them but there's always a risk of there being an unfair dismissal claim there and whether or not the new contract is mitigating that risk, and a tribunal would say that the employee should have accepted that new contract in order to mitigate their losses. So we would never say that an employer should fire and rehire at the outset but that option is still available now. That will not be available at the end of next year.”

Joe Glavina: “What are clients currently asking you to do for them in this space, Gillian?”
 
Gillian Harrington: “At the moment clients are asking us to have a look over their contracts of employment firstly to make sure that they are currently compliant with employment law because there has been quite a lot of change actually even up until this date to employment law. So we are being asked by clients to look at current employment law, but also as well what is likely to happen in the future and making sure that their new contracts of employment are going to be standing the test of time in terms of any changes made from the Employment Rights Bill - for example, fire and rehire and day one employment rights and so on. So it's mostly initially looking at an audit of what are their contracts like at the moment. Do they allow the companies to make any changes to terms and conditions? Do they have those specific variation clauses in place? Do they have adequate probationary periods, for example, and then making sure that they are ticking all the boxes in terms of once the Employment Rights Bill comes into place to make sure that their position is protected, adequately.”

If you would like help with an audit of your contracts to understand how you might be able to build in flexibility now ahead of the changes, please do contact Gillian – her details are there on the screen for you.

- Link to Out-Law article: ‘UK employers must get ahead of Employment Rights Bill ‘fire and rehire’ changes’