Blog | 02.03.2026
The introduction of new worker protections aims to prevent unfair dismissals, in which employees are terminated and immediately reinstated under a new, less favourable contract. Once implemented, a fire and rehire ban will mean that employers will no longer be able to dismiss or replace workers based on contractual terms alone, and any changes to contractual terms, such as pay, pension allowance, and holiday entitlement, will be restricted to protect workers' rights. In fact, those who continue to engage in unscrupulous fire-and-rehire practices could face a doubled fine for redundancy breaches. However, after pushback from major UK businesses, the government continues to consult on the contractual changes that are to fall under the legislation. “Pushing implementation back to January 2027 gives more time to consult with businesses on how the changes will work and allows employers time to prepare,” professional support lawyer, Antonia Blackwell, told CIPD in February. The question is, what does this delay mean for UK employers in 2026? Let’s find out.
How are the Rules on Fire and Rehire Changing?
Under the new Employment Rights Act 2025, it will be much harder to dismiss and rehire an employee based on contractual reasons.
While fire and rehire has always been frowned upon, only now will employees have a strong claim for unfair dismissal that will likely result in a hefty fine for offending businesses.
Here are just a few ways the rules on contract-based dismissal are changing in 2027
Only Limited Changes Will be Allowed Without Risk
The new legislation will define new restricted variations that can not be changed without agreement from the employee.
These currently include core terms such as pay, hours, holiday or pensions; however, this aspect of the bill is currently under review.
Violating these core terms will result in automatic unfair dismissal, with a narrow exception for some UK employers who can prove genuine financial distress, or that all other options were explored.
Employers Must Follow a Fair Process Before Dismissing Workers
If employers dismiss an employee under contractual terms that are not restricted, they must still follow a fair process.
Employers must document negotiations and prove that they have consulted with workers and any present unions before considering contract-based dismissal.
From January 2027, tribunals will be responsible for deciding how fair the contractual dismissal process was, meaning that even when restricted variations are left untouched, ‘fire and rehire’ will still remain extremely difficult and should be approached with caution.
Despite Delays, There are Still Limits
Despite significant delays, it’s important to remember that there are still limits for current UK employers.
“The delay does not make fire and rehire lawful in a new way. It remains legally possible but the 2024 statutory code of practice already makes clear that dismissal and re-engagement should be an absolute last resort after meaningful consultation and after exploring alternatives,” claims Alan Lewis, partner at Constantine Law.
In fact, any employers pushing ‘sign or be sacked’ tactics before 2027 could still be in line for serious unfair dismissal claims, especially when employment tribunals uplift compensation by up to 25% for businesses dismissing staff on a contractual basis.
What UK Employers Can Legally Do Now
Instead of pushing through contract-based dismissals before the bill is passed, UK employers have been advised to use the delay to amend any contracts and strictly follow the 2024 employment rights code to avoid any future penalties.
The best way to prepare for the 2027 legislation is to implement strategies to mitigate the risk of unfair dismissal and improve employer-employee relations ahead of the deadline.
Strengthen People Management
Strengthening employee relations is the key to improving fair decision-making in the workplace, ahead of the 2027 bill.
Investing in a robust HR system like Access PeopleXD Evo, which can automate core HR, payroll, and workforce functions, helps avoid rushed contractual changes that lead to unfair dismissals.
Better still, effective HR technology makes it easier to track consultation steps and documentation. This means that if taken to a tribunal, employers can demonstrate they’ve followed fair and reasonable procedures to dismiss an employee.
Review Existing Contracts
Using the delay to review existing contracts is beneficial for employers still looking to make changes before 2027.
With the current ability to ‘fire and rehire’ under the 2024 statutory code of practice, employers can still make the decision to take the risk before notice of dismissal is given.
However, this should be approached with extreme caution. To be successful, “HR and line managers should also be trained on how communications and consultation records will be scrutinised in a tribunal years later,” continues Lewis.
Proceed With Caution
Now is the time for UK employers to make cautious changes ahead of the 2027 employment bill.
However, before making any changes to live employee contracts, employers must clearly explain the reasons for the change, consult with affected employees and their unions, and ensure they have documented efforts to explore alternatives to dismissal.
Dismissal of employees should remain a last resort, not a quick fix for financial gain. Employers making moves to ‘fire and rehire’ in 2026 should proceed with caution.
About the Author: Rebecca Barnatt-Smith
Rebecca is a content writer at Solvid and a freelance journalist specialising in employment trends, HR strategy, and workplace culture.