Fire-and-rehire ban slips to March 2027; dismissal becomes automatically unfair

Employers planning contract changes by dismissal and re-engagement have about two months longer before the ban bites. The prohibition on fire and rehire is now expected sometime in March 2027, not January 2027.Acas The government has not given an exact date yet.

From that point, dismissing an employee to re-engage them or another person on varied terms to do the same or substantially the same duties will in most cases count as automatically unfair dismissalAcas. That covers a dismissal where the employer sought a restricted variation the employee did not agree, and a dismissal to enable re-engagement on varied terms where a difference is a restricted variation.Legislation

Restricted variations include cutting or removing sums payable in connection with employment, changing a work measure that sets pay, varying pension terms, varying required hours, varying shift timing or duration in cases set by regulations, reducing time off, and adding a term that lets the employer impose such changes unilaterally.Legislation

There is a narrow financial-difficulties defence.Legislation A private employer must show the variation was needed to eliminate, prevent, significantly reduce or mitigate financial difficulties affecting, or likely imminently to affect, its ability to continue as a going concernLegislation, and that it could not reasonably have avoided the changeLegislation. Public-sector employers face the equivalent test for financial sustainability of statutory functionsLegislation, and local authorities need a relevant intervention direction citing financial difficulties plus unavoidable need. Tribunals apply judicial-review principles to unavoidability.

Until the ban starts, fire and rehire remains lawful only as a last resort.Acas Employers must have made all reasonable attempts to reach agreement through full and thorough consultation, and even where the employee stays on under a new contract the termination counts as a dismissal. Employers must show a fair reason, follow a fair procedure, give correct notice and offer a right of appeal.Acas The Code of Practice on dismissal and re-engagement on GOV.UK is the minimum procedure, including contacting the Acas helpline before raising fire and rehire.Acas Unreasonable failure to follow it can increase a protective award by up to 25%, and an employee's unreasonable failure can reduce it by up to 25%.

Where 20 or more dismissals and re-engagements are proposed at one establishment within 90 days or less, employers must collectively consult recognised unions or elected representativesAcas to try to avoid dismissals, reduce numbers and limit consequences, starting at least 30 days before the first dismissal for 20 to 99 employees and at least 45 days before for 100 or moreAcas. The process follows the redundancy collective-consultation process even when the reason is some other substantial reason. Failure can bring up to 180 days' full pay for each affected employee for failures from 6 April 2026Acas, with no two-year service requirement.

Employers planning dismissals around that date should take advice and diary December 2026 for detailed advice on the new law.

The legal basis is section 28 of the Employment Rights Act 2025 inserting sections 104I to 104K into the Employment Rights Act 1996, the Code of Practice on dismissal and re-engagement, and the collective-consultation and protective-award rules.