ERA 2025: The End of Fire and Rehire

The Employment Rights Act 2025 will make fire and rehire — dismissing employees and re-engaging them on worse terms — automatically unfair dismissal in most circumstances. This change takes effect for dismissals on or after 1 January 2027; it is not yet in force. The practice, which drew widespread criticism during the pandemic, will then be effectively prohibited as a legitimate restructuring tool.

The legislation allows dismissal where the employer can demonstrate genuinely exceptional financial circumstances that threaten the viability of the business. But the bar is high, and the burden is on the employer to prove it. Using fire and rehire as a shortcut to achieve a pay cut or reduce benefits will not meet this threshold.

The practical implication is that, once in force, changing terms and conditions will require genuine agreement — and it is sensible to work on that basis now. Consultation must be meaningful, not cosmetic. If you are considering any change to employment contracts — pay, hours, location, benefits — take legal advice before moving to any form of compulsory process. Mellow's document store keeps contracts current and tracks any amendments that have been formally agreed, which matters in demonstrating consent.