The UK Government has provided further detail on how its upcoming fire and rehire reforms will operate, giving employers greater clarity on which contractual changes will be subject to the strongest legal protections.
Alongside confirming the treatment of expenses, benefits and shift patterns, the Government has also announced that the new fire and rehire provisions under the Employment Rights Act 2025 will now come into force in March 2027, rather than in January 2027 as expected.
What are the new fire and rehire rules?
The Employment Rights Act 2025 introduces significant restrictions on the use of dismissal and re-engagement, commonly known as “fire and rehire”.
Under the new framework, it will be automatically unfair to dismiss an employee in order to impose certain protected contractual changes, known as restricted variations, unless a very limited exemption applies for employers facing serious financial difficulties. The restricted variations include:
- reductions to pay,
- changes to total hours,
- reductions to leave entitlements,
- changes to pensions,
- changes to specified shift pattens.
It will also be automatically unfair to replace an employee with a non-employee doing substantially the same role. There will also be additional procedural hurdles to jump through for a dismissal for making an unrestricted variation to be held to be fair.
The Government is now consulting on an updated Code of Practice on Dismissal and Re-engagement, which will help employers understand their responsibilities when seeking to make contractual changes. This will run until 17 December 2026.
Response to Closed Consultation
On 22 October 2026, the government published its response to the consultation on how expenses, benefits in kind, and shift patterns should be treated under the new “fire and rehire” regime.
Expenses and benefits
The recently published consultation response has confirmed that most expenses and benefits in kind will not be a restricted variation, as the Government recognised that allowing employers to make some adjustments, where necessary and subject to appropriate consultation, may help to avoid redundancies and support long-term business viability. However, there are three important exceptions, which will fall within the restricted variation rules:
- Travel expenses, including mileage allowances.
- Accommodation expenses incurred through work.
- Long-term accommodation provided as a benefit in kind.
Where these entitlements form part of an employee’s contract, dismissal and re-engagement will be automatically unfair.
Share schemes excluded
The Government has also confirmed that employee share schemes will sit outside the restricted variation framework. This means organisations will retain more flexibility when making changes to share-based reward arrangements.
Shift pattern changes face greater protection
The Government has also clarified which shift pattern changes will be treated as restricted variations. A protected change will arise where an employee is required to:
- Move from day work to night work, or vice versa.
- Move from weekday working to weekend working, or vice versa.
For these purposes, night work will be defined as work carried out between 11pm and 6am. The rationale is that these changes can have a significant impact on employees’ caring responsibilities, family commitments and overall wellbeing.
By contrast, smaller changes, such as moving a shift by a few hours without crossing day/night or weekday/weekend boundaries, and changes to availability windows (where the contract sets out a range of hours within which the employee may be scheduled to work) will not be restricted variations.
Contractual status matters
Importantly, changes will only be a restricted variation where the entitlement is contractual.
If a benefit is provided through a non-contractual policy, or where a valid contractual variation clause allows changes, employers may still be able to amend arrangements without triggering the restricted variation provisions.
For many employers, this highlights the importance of reviewing contracts, policies and benefit documentation before the new rules take effect.
Fair process will remain essential, even when the change is not automatically restricted
If an employee is dismissed and re-engaged to impose a contractual change which is not a restricted variation, the dismissal will not be automatically unfair. However, in addition to judging fairness by the usual unfair dismissal tests, the Act requires tribunals to take account of the reason for the variation, any individual or collective consultation and anything that the employee was offered in return for the change.
The revised Code of Practice will also still apply (even to non-restricted changes), and it is expected to place a greater emphasis on meaningful consultation and employee engagement before changes are implemented.
Employers should also note that failure to follow the Code could lead to compensation awards being increased by up to 25%.
A delayed timeline, but not more time to ignore it
The Government has confirmed that the reforms will now take effect in March 2027, rather than January 2027 as previously anticipated.
Interestingly, the existing Code of Practice is expected to be withdrawn in March 2027, while the replacement Code is not expected to come into force until Summer 2027. This could create a temporary gap in formal guidance, making preparation even more important.
Regulations specifying the restricted variations (including changes to shift patterns) are expected to be published during Autumn 2026, so we will have these prior to the changes taking effect in March.
What should employers be doing now?
Although implementation is still some months away, employers should use this period to prepare by:
- Considering whether you need to make any changes before the new regime comes into force. This should still be done with caution, but it is likely to be easier now than in March 2027, so it is still worth doing it sooner rather than later.
- Reviewing employment contracts and variation clauses. Variation clauses are heavily restricted by case law, but it is still advisable to ensure that flexibility clauses are drafted as widely and effectively as possible.
- Auditing benefits and expenses that have contractual status.
- Assessing shift pattern provisions and scheduling arrangements.
- Strengthening consultation processes and focusing on other methods to effect change.
- Incentivising employees will become more important.
- Training HR teams and managers on the incoming changes.
How Refreshing Law can help
While the latest announcements provide welcome clarity, they also increase the importance of robust contracts, careful planning, and meaningful employee consultation.
Refreshing Law can help employers review their existing arrangements, assess areas of risk, and prepare for the new regime well before the March 2027 implementation date.
CONTACT US
We’re here to help with any questions or concerns you may have. Whether you need expert advice or would like an initial conversation about our services, pricing, or the options available, please don’t hesitate to get in touch. At Refreshing Law, what sets us apart from other law firms is that you’ll get to speak to an experienced employment lawyer right from the very first call.
lreynolds@refreshinglawltd.co.uk
Lousha Reynolds
Refreshing Law
