Fire and Rehire: New Rules on Expenses and Shift Patterns
On 22 October, the Government confirmed which expenses, benefits and shift changes it intends to protect under the new fire and rehire rules. Its updated timetable places implementation in March 2027, rather than January. The protections will apply in Great Britain, with regulations still needed to implement the detailed decisions.
In Brief
The Government has confirmed which expenses, benefits and shift changes will be protected under the new fire and rehire rules, now expected to take effect in March 2027. Most expenses and benefits in kind will fall outside the restrictions, but specified travel and accommodation expenses, long-term accommodation benefits and certain changes between day and night or weekday and weekend working will be protected, subject to a narrow financial-difficulties exception. Separately, ONS figures show UK vacancies fell to 691,000 in July–September 2026, their lowest level outside the pandemic since 2014. Businesses employing fewer than 10 people recorded the largest decline among employer-size categories.
Key Points
- Fire and rehire – Contractual expenses and benefits: Most expenses and benefits in kind will be excluded from the fire and rehire restrictions. However, changes to contractual travel expenses (including mileage), work-related accommodation expenses and long-term accommodation provided as a benefit in kind will be restricted variations, while share schemes will remain outside the protections.
- Fire and rehire – Shift patterns: Dismissing employees to require night work (11pm–6am) or daytime work, or weekend or weekday working, where this was not previously required will generally be automatically unfair. Moving shifts within daytime hours or changing contractual availability windows will not, by themselves, fall within these specific shift-pattern restrictions.
- Fire and rehire – Dismissals and exceptions: The protections also cover dismissing employees to re-engage them, or replace them with other employees, on terms that include a restricted variation, and replacing them with non-employees doing substantially the same work. For private businesses, a narrow exception applies where the changes are needed to address financial difficulties threatening their viability and could not reasonably have been avoided. Even then, the dismissal must still be fair.
- Fire and rehire – Code of Practice: The existing statutory Code is due to be withdrawn in March 2027, with its replacement not expected until summer 2027 and consultation closing on 17 December 2026. During that likely gap, the Code-related compensation uplift of up to 25% would not be available, although employers' other legal obligations will continue.
- Job vacancies – Lowest non-pandemic level since 2014: ONS estimates 691,000 vacancies in July–September 2026, down 21,000 (2.9%) on the quarter and the lowest level outside the pandemic since 2014. ONS notes that the quarterly fall remains within its survey's confidence interval.
- Job vacancies – Smaller businesses: Vacancies fell in 14 of the 18 industry sectors, with construction recording the largest decline. Businesses with fewer than 10 employees saw vacancies fall by 21.1% on the quarter, and ONS survey feedback suggests increased labour costs may be holding back recruitment by smaller firms.
As we reported when the earlier fire and rehire consultation opened, the central question was which contractual changes should attract the strongest safeguards. The response now draws a clearer distinction between protected entitlements and changes that remain subject to ordinary unfair dismissal scrutiny.
What Will the Fire and Rehire Rules Protect?
Under the Employment Rights Act 2025, dismissing an employee because they refuse to accept a restricted contractual change will generally amount to automatic unfair dismissal, subject to a narrow financial-difficulties exception. The protections also cover certain cases where an employee is dismissed and re-engaged, or replaced by another employee performing substantially the same duties, on terms that include a restricted variation. Restricted variations include reductions in pay, changes to pension arrangements or the total number of contractual working hours, and reductions in leave entitlement.
The Government's 22 October response confirms that fire and rehire protections will cover specified contractual travel expenses, such as mileage, as well as work-related accommodation expenses and long-term accommodation provided as a benefit in kind. Share schemes will remain outside these restricted variations. The protection therefore extends beyond wages to contractual support that employees may rely on for work-related travel or housing.
The distinction is contractual, not simply whether a payment is called an allowance or benefit. Non-contractual arrangements and valid flexibility clauses may allow changes without dismissal, but they are not unrestricted permission to remove entitlements. Acas guidance explains that flexibility clauses must be used reasonably, with consultation and reasonable notice. Dismissal to insert a new clause permitting protected changes without agreement will itself be caught, because adding that power is a restricted variation.
Fire and Rehire: Protected Shift Changes
The protected shift changes will cover introducing night work where none was previously required, or daytime work where none was required, and equivalent moves between weekday and weekend working. For these protections, night-time will mean 11pm–6am. Availability windows, the hours within which employees may be rostered, will not receive this specific shift-pattern protection.
Moving a shift within daytime hours will not automatically become a restricted variation. However, this does not make dismissal fair: the fire and rehire framework requires tribunals to consider consultation with employees and recognised unions or other relevant representatives, alongside the reasons for the change and anything offered in return.
Exceptions and Replacement Workers
The legislation also restricts dismissing employees to replace them with non-employees carrying out substantially the same activities. This separate protection against “fire and replace” prevents employers simply avoiding the fire and rehire rules by switching to agency labour or contractors where the work remains, subject to the statutory conditions and exceptions.
A narrow financial-difficulties exception remains. Private businesses must show that the changes address financial difficulties threatening their viability, or likely to do so imminently, and that the need for those changes could not reasonably have been avoided. Different statutory tests apply to public bodies and local authorities. Even where the exception applies, the dismissal must still be fair; ordinary cost-saving is not a general exemption from fire and rehire protections.
A Revised Code and Employer Preparation
A consultation on the revised dismissal and re-engagement Code closes on 17 December 2026. The existing statutory Code remains in force until its planned withdrawal in March 2027, and employment tribunals can currently increase compensation by up to 25% in relevant cases where an employer unreasonably fails to comply with it. The replacement Code is not expected until summer 2027, leaving a likely gap of several months without an applicable statutory Code. During that period, this specific Code-related compensation uplift would not be available.
However, the absence of a statutory Code would not remove employers' obligations under unfair dismissal law or the new fire and rehire restrictions. Employers should continue to consult meaningfully, explore alternatives and follow fair procedures. Reviewing contractual expenses, accommodation benefits and shift arrangements now will help identify where agreement is needed before implementing changes. The purpose of the reforms is not to prevent agreed changes, but to limit dismissal as a means of imposing them.
UK Vacancies Fall as Small Businesses Cut Recruitment
ONS figures estimate 691,000 vacancies in July–September 2026, down 21,000, or 2.9%, on the previous quarter and 37,000 over the year. Excluding the pandemic, vacancies have not been this low since July–September 2014.
Looking at individual industries, vacancies fell in 14 of the 18 sectors, with construction recording the largest decline of 7,000, or 20.5%. A separate breakdown by business size shows that smaller employers were particularly affected. Firms with fewer than 10 employees recorded 21,000 fewer vacancies, a fall of 21.1%, while businesses employing 250–2,499 people were the only size category to report an increase.
The wider labour-market release presents a mixed picture. Unemployment was estimated at 4.7% in June–August, while employment among 16–64-year-olds reached 75.3%. There were 2.4 unemployed people per vacancy, down from 2.5 the previous quarter. ONS says feedback from its Vacancy Survey continues to suggest that smaller firms may be holding back recruitment because of increased labour costs.
The ONS notes that the quarterly fall of 21,000 vacancies remains within its survey's confidence interval, meaning that this movement alone does not establish a clear deterioration in recruitment demand. Our recent article on skills shortages also highlighted continuing competition for specialist recruits. Fewer vacancies do not necessarily mean employers can find the skills they need.
Employers: What This Means
Employers should review contracts and plan any changes to contractual terms ahead of the expected March 2027 commencement of the fire and rehire restrictions. Dismissing employees to impose restricted variations will generally be automatically unfair, making it particularly important to seek agreement through genuine consultation. The financial-difficulties exception will be available only in narrow circumstances. Separately, falling vacancies do not necessarily make recruitment easier, particularly for specialist roles, so workforce planning should weigh recruitment costs against developing existing staff.
- Fire and rehire – Review contractual terms: Identify which terms are contractual, including pay, hours, pensions, holiday, travel and accommodation expenses, accommodation benefits and shift patterns, and distinguish them from genuinely discretionary arrangements. Check whether planned changes would be restricted variations and whether existing flexibility clauses can be relied on reasonably. Once the rules are in force, dismissing employees to insert a new clause permitting restricted changes will itself be caught.
- Fire and rehire – Consult before making changes: Seek agreement through meaningful consultation with affected employees and recognised trade unions or other representatives. Explore alternatives to dismissal, and record the business reasons for any proposed change and anything offered in return. Ordinary cost-saving will not satisfy the exception, which for private businesses requires financial difficulties threatening viability and changes that could not reasonably have been avoided, so employers relying on it should keep supporting evidence such as accounts and cash-flow forecasts.
- Fire and rehire – Prepare for the Code transition: Follow the current statutory Code where it applies to dismissal and re-engagement proposals before its planned withdrawal in March 2027, as tribunals can increase compensation by up to 25% for unreasonable non-compliance in relevant cases. During the expected gap before the revised Code takes effect in summer 2027, employers should continue to consult fairly and consider the draft Code as guidance, recognising that its provisions are not yet final. Monitor the regulations still needed to implement the expenses and shift-pattern decisions.
- Job vacancies – Review recruitment plans: Lower vacancy numbers do not necessarily mean suitable candidates will be easier to find. There were 2.4 unemployed people per vacancy, down slightly from 2.5, and competition for specialist skills continues. Review recruitment budgets alongside retention priorities, and consider where developing existing employees could fill skills gaps more cost-effectively than external hiring.
