When the new rules on "fire and rehire" are in force, how can an employer make contractual changes if the employees do not agree to the variation?

New rules under the Employment Rights Act 2025, due to apply from January 2027, mean that it will be an automatic unfair dismissal if an employer attempts to change employees' core terms and conditions by dismissing them and re-engaging them on new terms (fire and rehire). This is called a "restricted variation". There is a limited exception to these rules if the employer can demonstrate that the business is in financial difficulties and the variation was unavoidable.

Assuming there is no variation clause allowing the employer to make the change, if an employer proposes a "restricted variation" (for example a reduction in pay or a change in the number of hours to be worked), the employees are entitled to refuse to agree to the change.

The only way for the employer to make the change without unfairly dismissing the employees (once these provisions come into force) will be to persuade them to agree. One way to achieve this might be to insist that the change is included as part of any pay review or promotion. Whether this tactic would be effective depends of course on the nature of the change the employer wishes to impose.