The long-standing fire and rehire practice, which refers to the termination of staff and rehiring them on new, often unfavourable, terms, is now being subjected to more scrutiny. Following tighter government controls on the practice, including enhanced protections for workers and ACAS fire and rehire guidance, which will form the best and recognised practice. The UK HR practitioner community now must revisit the contracts of employment and how those changes should be managed.
It is no longer an issue of whether the practice is legally possible; rather, it is about whether it is a sustainable model for organisational trust, compliance and success in the long term. HR must move away from unplanned reliance on dismissal and reengagement, and instead create transparent, fair, and collaborative approaches to change.
There were about 718,000 job vacancies in the UK in July 2025, the lowest number of job vacancies since April 2021.
A New Legal and Ethical Context for Changing Contracts
With the government crackdown on fire and rehire, the employee relations context has changed considerably. Dismissal and reengagement still exist as an option; however, employers must justify such action with a strong, convincing business rationale and conduct appropriate consultation.
For HR, this implies:
- Legal Obligations
Employers must be able to demonstrate genuine business rationale for any changes to contracts of employment, a fair and necessary route.
- Ethical Obligations
In addition to the legal considerations, employees surely must expect that they will be treated with respect and transparency when changes to their contracts of employment are being made. Using fire and rehire fairly and ethically damages any trust built, but it also increases the likelihood of a fair dismissal claim.
This updated context makes it clear that an employer cannot treat every contract as a negotiable arrangement on their own terms. Moving forward, HR must work collaboratively to consult with employees about making changes to the employment contract.
Employees’ average regular salaries (excluding incentives) increased by 5.0% annually between April and June 2025. It was last below 5.0% in April-June 2022, when it was 4.9%.
A Proactive Blueprint for HR: Navigating Contract Changes Lawfully
Successfully managing workforce restructuring requires HR to adopt a structured and people-focused process that ensures fairness and compliance.
Step 1: Establishing a Genuine Business Case
To justify employment contract changes, HR must build a strong, evidence-based case. Superficial arguments about “efficiency” or “cost savings” won’t suffice. Instead:
- Analyse and document data: Demonstrate why the organisation cannot continue without change (financial viability, market shifts, or operational needs).
- Consider alternatives: Redeployment, voluntary change, or cost-saving initiatives should be explored before considering dismissal and reengagement.
- Maintain an audit trail: This helps defend against unfair dismissal claims and reassures employees that decisions are evidence-driven, not arbitrary.
By prioritising transparency and necessity, HR positions itself as a problem-solver rather than an enforcer.
Step 2: Conducting a Meaningful Consultation
The HR consultation process is now central to lawful contract changes. It should go far beyond box-ticking:
- Communicate early: Share the business case before decisions are finalised.
- Encourage input: Employees or unions often propose solutions that balance business needs with staff wellbeing.
- Involve representatives: Union or employee representatives lend legitimacy and help manage resistance.
- Show transparency: Share supporting evidence to prove the necessity of the change.
Handled well, consultation reduces risk and builds stronger employee relations, even in challenging times.
Beyond Compliance: Protecting Your Brand and Culture
To think that avoiding claims for unfair dismissal is a prudent HR strategy is short-term thinking. Mismanaging the process of employment contract changes through dismissal or rehiring may potentially damage your culture and reputation, and your ability to attract new talent.
HR leaders must:
- Trace Changes to Your Values
When making decisions about changing your workforce structure, do so for reasons that link to fairness and continuing long-term health for you and your workforce.
- Balance Costs vs. Culture
Remember not to save on short-term costs by having disengaged and demotivated employees.
- Prioritise Wellbeing
Contractual ambiguity can adversely affect mental health. HR leaders must demonstrate empathy and support through this change process.
- Protect your Reputation
In the age of instant online reviews, the way you care for individuals in difficult situations translates to employer branding.
Ultimately, how you handle dismissal and reengagement signals whether your organisation values people as partners or merely as costs.
In June 2025, the United Kingdom’s employment rate was 75.3%, up from 75.2% the previous month. After nearly slipping below 70% in 2011, the employment rate in the United Kingdom began to rise at a rapid pace, peaking in early 2020.
Looking Ahead: Future-Proofing Your Organisation
The decline of fire and rehire is indicative of a larger trend: employees, regulators, and society expect fairness and partnership. So what can HR do to get ahead?
- Improving Workforce Planning
Implement processes to plan for anticipated market and regulatory changes to avoid last-minute employment contract changes.
- Build Flexibility at the Outset
If an employment change is going to happen, well-drafted but fair flexibility clauses increase the likelihood of not going through a disruptive workforce restructure later.
- Training Managers in Communication
Your front-line managers will be the key to effectively communicating difficult decisions.
- Continuously Monitor ACAS Fire and Rehire Guidance
Your compliance relies on constantly monitoring changing regulations.
- Embark On Co-Creation
Forge partnerships with employees, make them accountable for building their future rather than providing them with pre-determined decisions from the top down.
Proactive planning reduces the need for crisis-driven dismissal and reengagement, ensuring that organisations remain agile and trusted.
Conclusion
The end of widespread fire and rehire marks a turning point for UK employment relations. While the practice of dismissal and reengagement is not entirely outlawed, its use is now restricted, scrutinised, and fraught with reputational risks. For HR, the challenge is to lead with lawful, transparent, and collaborative strategies that safeguard both compliance and culture.
The organisations that thrive will be those that see the new rules not as limitations, but as an opportunity to strengthen trust, enhance the relationship of employees, and future-proof their workforce.
At PixelsHR, we believe successful HR means choosing complicity over conflict, proactive planning over crisis management, and trust over tension.
