Government delays major fire-and-rehire reforms until 2027

On 3 February 2026, the Government confirmed a revised implementation timeline for the forthcoming reforms under the Employment Rights Act (“ERA”). The ERA had sought to introduce changes in October 2026 to fire-and-rehire practices. Under the revised timetable, however, both employers and employees can now expect these changes to be implemented in January 2027 following a consultation scheduled for this year.

What does the Employment Rights Act seek to achieve?

The ERA intends to address “fire and rehire” scenarios, where employers attempt to introduce unagreed contractual changes by dismissing staff and re-engaging them in essentially the same role but on amended terms. While it is recognised that, in some cases, there may be no practical alternative, it is an aim of the legislation to ensure that any such changes follow a ‘proper process based on dialogue and common understanding between employers and employees’.

In practice, where an employer proposes or seeks to impose a ‘restricted variation’ to a core term of an employee’s contract of employment, any dismissal arising from the employee’s refusal to agree to such variation shall be treated as automatically unfair. Importantly, the core terms defined as restricted variations will likely include the following:

• ‘Reductions to pay
• Where pay is linked to measures of work done (such as targets), changes to those measures/targets
• Changes to pensions
• Changes to total hours
• Reduction to leave entitlement
• Changes to shift patterns which are specified in regulations
• The inclusion in a contract of employment of a term enabling the employer to make any of the above changes without the employee’s agreement’.

It is important to note that an exception will apply where the employer can show that financial difficulties were affecting the business, the changes were necessary to address those difficulties, and the changes were, therefore, unavoidable. Once this has been established, it will be for the Employment Tribunal will decide whether the dismissal was fair, rather than it being deemed automatically unfair.

What you need to know about the upcoming consultation

Although a consultation had been expected to take place in Autumn 2025, on 4 February 2026, the Department for Business and Trade launched a notice seeking views on two of the proposed fire-and-rehire changes.

We address each of the proposed changes in turn.

1. Employment expenses and benefits

The first change to be consulted on concerns employment expenses and benefits.

Here, the Government is currently considering whether certain, or all, expenses and benefits in kind should be excluded from the scope of restricted variations. It seeks views on two options: whether a dismissal should be treated as automatically unfair if changes are made to the following expenses or benefits, or whether such changes should be excluded from the scope of automatic unfair dismissal:

• Reimbursement of travel expenses
• Reimbursement of accommodation expenses
• Arrangements for the provision of long-term accommodation
• Share schemes involving variable or discretionary awards.

At present, the consultation explains that the Government’s preference is to exclude all of the above expenses and benefits from the category of restricted variations. This is justified on the basis that it will provide employers with more flexibility. As such, if the Government were to proceed with this intention, employers would be permitted to make such changes to an employee’s contract without the risk of a claim for automatic unfair dismissal. Importantly, however, eligible employees could still bring a claim for unfair dismissal in the usual way, if they resign in response to an actual or anticipated breach of the employment contract, where they are set to lose partly or completely those benefits, or where the employer dismisses in order to re-engage on different benefit terms.

2. Shift patterns

The second change concerns shift patterns. Here, the Government are seeking views on which variations to ‘the timing or duration of a shift’ will be considered a restricted variation.

The first option under consideration is to treat shift changes from day to night (or vice versa) and from weekday to weekend (and vice versa) as falling within the scope of restricted variations. Under this approach, if an employer seeks to impose a change requiring an employee to work shifts or days they were not previously required to, a dismissal arising from the employee’s refusal could be treated as automatically unfair.

The second option is to exclude all changes to the timing and/or duration of shifts from the scope of restricted variations.

The Government have indicated that their current view is to proceed with option one which they believe will give ‘necessary flexibility to employers, while protecting employees from being fired in order to make extreme changes to their shift patterns which could have significant consequences for them’.

The consultation will close on 1 April 2026.

How to take part in the consultation

Further information on the consultation, including how to submit views, is available on the Government’s website at: https://www.gov.uk/government/consultations/make-work-pay-fire-and-rehire-changes-to-expenses-benefits-and-shift-patterns

If you have any questions about how these changes may affect your workplace or if you require assistance in implementing these changes, please do contact a member of our Employment team.