What has changed?

The new ban on “fire and rehire” was due to start in January 2027. The government has now delayed it to March 2027. Fire and rehire is where an employer dismisses staff members who won’t agree to new terms and then offers to take them back on the new terms.

Once the ban starts, it will be much harder to make certain changes to employees’ contracts without their agreement. Those changes include pay, hours and holidays. Dismissing someone because they refuse a change like that will usually be unfair.

The good news

If you need to change contractual terms that are no longer fit for purpose, there is still a window of opportunity to go through consultation and, if necessary, dismiss and offer re-engagement. Even after the change in the law you will still be able to make changes where the employee’s contract already allows it. Most often that’s through a “variation clause”, which is a term in the contract that lets you make reasonable changes to certain terms. If the contract allows the change, the new rules should not stop you making it.

What should you do before March 2027?

Consider whether you should take this final chance to make changes through consultation, and the dismissal and re-engagement process.

You may wish to add variation clauses with clear unilateral powers to make changes to your contracts now.  You might also consider adding words to other clauses on areas, shifts and hours, so you have the flexibility you need in future.

New starters: This is easy. Add a variation clause to your standard contract so everyone you take on from now has one and ensure other clauses have flexibility built in where possible.

Existing staff: You cannot add a variation clause or change other clauses without the employee’s agreement. One practical option is to offer this year’s pay rise on condition that the employee signs a new contract or contract letter that includes this.

What else do the new rules say?

Expenses and benefits: changes to most expenses and benefits in kind will not be covered by the ban. The exceptions are travel expenses (including mileage), accommodation expenses and long-term accommodation provided as a benefit.

Non-contractual benefits: the ban only applies where the benefit is part of the contract of employment. Benefits set out in a non-contractual policy, or covered by a variation clause, can still be changed.

Working hours: the ban will apply where a change means an employee has to work at night, during the day, at weekends or on weekdays when they did not have to before. Moving a daytime shift by a few hours or changing the range of hours within which the employee can be scheduled to work will not be covered by the ban. You will still need to follow a fair process and the new Code of Practice, which is expected in the summer. If you do not, a tribunal can increase any compensation by up to 25%.

If you would like help reviewing your contracts or planning pay rise letters, please get in touch.