Revised code of practice on dismissal and re-engagement

The Government has launched a consultation on a revised Code of Practice on Dismissal and Re-engagement (Fire and Rehire). The Code which came into effect in 2024 and is being updated to take account of the legal changes to fire and rehire under Employment Rights Act 2025.

Under the changes, it will be an automatic unfair dismissal for employers to dismiss an employee to change certain core terms (‘restricted variations’) unless they meet a narrow exemption for financial difficulties.

These restricted variations include reductions to pay, changes to total hours, reductions to leave entitlement, changes to pensions, and specified shift pattern changes. It will also be automatically unfair dismissal to replace an employee with a non-employee doing substantially the same role. There will be additional procedural hurdles to jump through for a dismissal for making an ‘unrestricted variation’ to be held to be fair.

Key points:

• The fire and rehire changes will take effect in March 2027, rather than January 2027 as expected.
• The 2024 Code will be withdrawn in March 2027, but the new Code will not come into force until Summer 2027, leaving a gap of several months with no Code in place.
• Restricted variations will include changes to shift patterns which are to be ‘specified in regulations’.
• The draft Code adds guidance on the financial difficulties exemption, expressly dealing with the very different forms that financial difficulties take in the private sector, public sector, and within local authorities.

The Government are now consulting on the revised Code until December 17 2026.

Consultation description

The Employment Rights Act 2025 makes several changes to the statutory protections against fire and rehire, and fire and replace practices (dismissal and re-engagement).

The government is now updating the code of practice on dismissal and re-engagement (‘the code’) to reflect the legislative changes.

The government has redrafted the existing version of the code and is now seeking views on these changes before the code is finalised and brought into effect.

For more details on the Make Work Pay: revised code of practice on dismissal and re-engagement and how to submit a response, click here.

In addition, this week, the Government has published its response to the consultation on how expenses, benefits in kind and shift patterns should be treated under the fire and rehire provisions of the Employment Rights Act 2025.

Key points, as outlined by Daniel Barnett:

• Expenses and benefits in kind will be carved out of the “sums payable” restricted variation, with three exceptions: travel expenses (including mileage), accommodation expenses, and long-term accommodation provided as a benefit in kind.
• Share schemes are out of scope and changes to these will not amount to restricted variations.
• Changes will only be a restricted variation where the entitlement is a contractual term in the first place; benefits set out in a non-contractual policy, or covered by a contractual variation clause, can still be changed.
• On shift patterns, a restricted variation will arise where a change requires an employee to work at night (11pm to 6am) or during the day, or at weekends or on weekdays, where they were not previously required to.
• Changes to availability windows (where the contract sets out a range of hours within which the employee may be scheduled to work) will not be restricted variations.
• Smaller changes, such as moving a daytime shift back a few hours, remain unrestricted variations, subject to the enhanced fairness test and the Code of Practice, with an uplift of up to 25% for non-compliance.

Regulations are expected to take effect alongside the fire and rehire protections in March 2027.