Fire and Rehire in 2025

With the UK’s employment laws tightening under the new Labour government, the days of easily implementing “fire and rehire” tactics are coming to an end. The new statutory Code of Practice, which came into force in 2024, already makes it clear that businesses must follow strict procedures. However, further legislation is expected in 2025 to make fire and rehire even harder to justify.

To avoid legal and reputational risks, here are three key tips for employers navigating the 2025 employment landscape.

1. Meaningful consultation is no longer optional

The days of making unilateral contract changes without discussion are over. Employers must fully engage employees before attempting any contractual change, including:

• Explaining the business case behind proposed changes
• Consulting with trade unions or employee representatives where applicable
• Considering all reasonable alternatives before discussing dismissal

With Labour’s proposed Employment Rights Bill expected to strengthen workers’ protections, failure to genuinely consult could result in legal claims and financial penalties.

2. Fire and rehire must be a last resort (and that’s now the law!)

Since October 2024, the UK government has been moving to further restrict fire and rehire. Under the proposed changes in 2025, businesses could face:

• Automatic unfair dismissal claims if employees refuse contract changes
• Higher compensation penalties at tribunal (currently up to 25% more if the Code of Practice isn’t followed)
• Tougher scrutiny over whether all alternative options were explored

Employers must now prove they exhausted every alternative—from voluntary agreements to business restructuring—before considering dismissal.

3. Follow fair procedures or risk tribunal action

If dismissal and re-engagement are absolutely necessary, employers must ensure:

• The process is clearly documented and legally compliant
•  Employees receive fair notice periods and support
•  There is no loss of continuous service for rehired employees

Recent court cases—such as the Tesco warehouse workers’ Supreme Court win—have shown that tribunals are increasingly showing empathy and favour at times with employees. Employers who fail to follow proper procedures could face severe financial and reputational damage in 2025.

Final Thoughts

With Labour’s crackdown on fire and rehire, the safest strategy for businesses in 2025 is to avoid it wherever possible. Instead, focus on transparent negotiations, fair procedures, and creative alternatives to maintain trust and compliance. As the law continues to evolve, businesses must stay ahead of the changes—or risk being caught out.

This is where an up to date Employee handbook is key.

Get in touch with our team today on E: [email protected]

Get in touch with our team today

E: [email protected]

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