Reform of rules on dismissal and re-engagement

Implementation date: January 2027

The Employment Rights Act 2025 includes provisions to reform the rules on the use of dismissal and re-engagement (known as "fire and rehire").

Under the Act, a dismissal will be automatically unfair if the principal reason for the dismissal was:

• that the employee refused to agree to a variation of certain restricted terms in their contract; or
• to enable the employer to employ another person, or to re-engage the employee, under a varied contract of employment to carry out substantially the same duties.

The dismissal will not be automatically unfair if the employer can show that the variation of contract was necessary because of financial difficulties affecting its ability to carry on the business and that the need for the variation could not reasonably have been avoided.

The Government has confirmed in its timeline update on the Employment Rights Act 2025 that these measures will take effect in January 2027.