How does fire-and-rehire affect an employee's redundancy and other statutory rights?

Full answer

Fire-and-rehire (sometimes called dismissal and re-engagement) refers to an employer formally dismissing an employee, typically because the employee will not agree to a proposed change to their contractual terms (such as reduced pay, changed shift patterns, or altered benefits), and then immediately offering to re-employ them on the new, usually less favourable, terms instead — used as a way of forcing through contractual changes an employer cannot achieve through negotiation or agreed variation alone. This practice sits in a legally contentious area: dismissing someone specifically to change their terms can potentially amount to unfair dismissal if not handled correctly, since a dismissal must be for a fair reason (which can, in principle, include a genuine business need to change terms, sometimes categorised as "some other substantial reason") and the employer must follow a fair, genuinely consultative process rather than simply imposing the change and terminating anyone who objects without proper discussion or consideration of alternatives. Following significant public and political controversy over high-profile fire-and-rehire cases, a statutory Code of Practice on Dismissal and Re-engagement now applies, requiring employers considering this approach to engage in genuine, meaningful consultation with affected employees (and any recognised trade union) before making any final decision, explore and honestly consider alternative options, and treat dismissal and re-engagement as a genuine last resort rather than a default negotiating tactic — critically, an employment tribunal can increase (or decrease) compensation awarded in a related successful claim by up to 25% depending on whether the employer unreasonably failed to comply with the Code, giving it real financial teeth even though it is not itself a separate standalone right to bring a claim. On continuity of service and other length-of-service-dependent statutory rights (such as redundancy pay entitlement, which increases with years of service, or unfair dismissal protection, which generally requires two years' continuous service), a fire-and-rehire process that involves only a very brief gap (commonly interpreted as a week or less) between the old contract ending and the new one starting is usually treated as not breaking continuity of employment under specific statutory continuity rules, meaning length of service for most purposes continues to build as if uninterrupted — but employees facing fire-and-rehire should specifically check this point, and seek advice from Acas or a solicitor, since getting the continuity position wrong could unexpectedly affect future redundancy or unfair dismissal entitlements. Use the Redundancy Pay calculator to check how continuity of service affects your statutory entitlement.

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