Fire and rehire has been under close scrutiny in recent years, particularly following the high-profile P&O Ferries dismissals in 2022, prompting the introduction of a Dismissal and Re-engagement Statutory Code of Practice in July 2024. Most recently new restrictions on Fire and Rehire have been introduced by the Employment Rights Act 2025 (“ERA 2025”) which are intended to end the practice altogether, save for in very limited circumstances. Here is what schools and multi-academy trusts (“MATs”) should know in advance of the changes coming into force on 1 January 2027.
What is fire and rehire?
“Fire and rehire” means dismissing an employee under their existing terms and conditions of employment and re-engaging them on new terms. It often arises in situations where the employer proposes to make changes to an employee’s existing terms and conditions, but the parties are unable to reach agreement on the changes. Under current law, fire and rehire in itself is not unlawful provided that the employer complies with the good practice guidance set out in the Dismissal and Re-engagement Statutory Code of Practice and, where applicable, the employer has a fair reason to dismiss (typically “some other substantial reason”) and follows a fair process. Most employers use it only as a last resort after failed negotiation with the employee.
What will be changing under ERA 2025?
The ERA 2025 introduces a far more restrictive regime for fire and rehire. From 1 January 2027, fire and rehire will generally become automatically unfair and compensation is expected to be uncapped, with potential for reinstatement or re-engagement on the original terms. Key changes under ERA 2025 include:
- Dismissals connected to “Restricted Variations” – changes to pay, hours, pensions, shifts or time off – will be automatically unfair, with no qualifying service requirement and only a very narrow financial-distress exception. Wording on whether to include expenses, benefits and shifts as Restricted Variations is still being consulted on. An anti-avoidance rule also catches clauses that let employers impose changes unilaterally.
- Changes outside the Restricted Variation category are not automatically unfair, but will face closer scrutiny of the employer’s reasoning, the quality of consultation, union or representative involvement, and any incentives offered.
- A dismissal will also be automatically unfair where an employee is dismissed from their current terms and replaced by a non-employee doing substantially the same work, closing the current outsourcing loophole, subject to a narrow financial-distress defence and scrutiny of the process followed.
The reforms are expected to come into force on 1 January 2027, giving employers a short runway given the potential scale of the changes required.
What can schools and MATs do now?
The key takeaway is that employers will need to rely far more heavily on agreement rather than forced or unilateral change when making proposed changes to contracts of employment. Some practical steps include:
Audit existing contracts to identify fixed key terms (pay, hours, benefits, shift patterns, etc), where flexibility exists and potential risks, so necessary changes can be made now under the more flexible framework, and in good time before the 1 January 2027 ban on fire and rehire. Such processes will need to be commenced promptly to allow sufficient time for meaningful consultation, although be mindful of teacher notice periods that may well take the “dismissal” beyond 1 January 2027 unless a payment in lieu of notice is made to bring the termination date forward. Schools and MATs should also expect tactical delays from staff and unions to avoid the fire and rehire for as long as possible and push the matter into the new regime under ERA 2025.
Introduce or strengthen unilateral variation clauses now. Such clauses should be drafted precisely and exercised reasonably, for a proper purpose, with appropriate consultation and employee agreement. Reforms from ERA 2025 will impose an anti-avoidance rule, which is expected to restrict adding new clauses of this kind from implementation (expected before January 2027). Therefore, it is recommended to act now to preserve flexibility and strengthen any defence to an automatic unfair dismissal claim. Having said that, the test of reasonableness will still apply and in most cases, consultation will be required even where a variation clause exists in the contract of employment.
Step up consultation and engagement. Schools and MATs must give genuine consideration to alternatives and, where appropriate, incentives to secure agreement. These measures will matter more than ever in showing dismissal was a last resort.
Watch for two-tier workforce risk. While new hires commencing on different terms from legacy staff remain lawful but can create employee relations and administrative challenges.
Be mindful of TUPE. Even where you are proposing to change terms and conditions of employment or dismiss before the new fire and rehire regime comes into force, if the sole or principal reason for the change or dismissal is a TUPE transfer itself and there is no economic, technical or organisational (ETO) reason entailing a change in the workforce, any such action will be unlawful, and the dismissal automatically unfair (although minimum qualifying service requirements will still be required).
Other claims. Be mindful of other claims. Affected staff may bring other claims arising from an attempt to change their terms and conditions of employment, including constructive unfair dismissal. Even if you do not subsequently make any changes to terms and conditions of employment, staff may argue that the attempt to do so was unreasonable and a breach of the implied term of mutual trust and confidence, leaving them with no option but to resign and treat themselves as constructively unfairly dismissed.
Overall, the direction of travel is clear. Fire and rehire practices are becoming much harder to justify, and employers who plan ahead and focus on collaborative approaches will be in the strongest position.
This briefing is not intended to be a definitive statement of the law and is correct at the time of publication. It should not be taken as a substitute for professional legal advice. It does not represent the views of Winckworth Sherwood or any of the authors.
If your school or MAT require advice and assistance in relation to proposed changes to staff terms and conditions, fire and rehire or any other school HR or employment law related matter please contact Winckworth Sherwood’s dedicated Schools HR helpdesk on schoolshr@wslaw.co.uk or 0345 026 8690.