Fire and Rehire: Your Pay and Redundancy Rights UK 2026
Fire and rehire — dismissing staff and offering re-employment on new, usually less favourable terms — is legal but constrained by a statutory Code of Practice, and refusing new terms can trigger a genuine redundancy payment. Here is where you stand in 2026.
Legal, but not unconstrained
Fire and rehire has attracted significant public and political controversy in recent years, but it remains a legal (if heavily scrutinised) tool available to UK employers seeking to change contract terms that employees will not agree to voluntarily. The key legal safeguard is the statutory Code of Practice on Dismissal and Re-engagement, which sets out how employers should behave — genuine consultation, exploring alternatives, and treating dismissal as a last resort rather than a first move.
Redundancy Pay Calculator
Calculate your statutory redundancy pay based on age, length of service and weekly pay.
Open Redundancy Pay calculatorWorked example 1: proper process followed
An employer facing genuine financial difficulty proposes a 10% pay cut across a department, consults extensively with staff and their union over several weeks, explores and rules out realistic alternatives, and only proceeds with fire and rehire for the small number of employees who still refuse after genuine consultation.
| Step | Outcome |
|---|---|
| Consultation | Extensive, genuine, over a reasonable period |
| Alternatives explored | Documented and considered before proceeding |
| Compliance with the Code | Likely to be considered largely compliant |
| Tribunal risk if challenged | Lower — process broadly followed the Code |
Worked example 2: process not followed
A different employer announces a 15% pay cut with two weeks' notice, no meaningful consultation, and immediately dismisses and re-engages any employee who does not sign the new contract within the deadline.
| Step | Outcome |
|---|---|
| Consultation | Minimal or absent |
| Alternatives explored | Not documented |
| Compliance with the Code | Likely non-compliant |
| Tribunal risk if challenged | Higher — potential unfair dismissal finding, plus up to a 25% uplift on any compensation awarded |
Worked example 3: refusal leading to genuine redundancy
James, aged 45 with 12 years' service, refuses new contract terms proposed through a fire-and-rehire process and is dismissed, with the employer treating this as a genuine redundancy because the underlying business rationale is a reduced need for employees in his specific role (rather than simply wanting to cut his pay for the same role).
| Item | Calculation |
|---|---|
| Age band | 41+ (1.5 weeks' pay per year) |
| Qualifying years (capped at 20) | 12 years |
| Statutory redundancy pay | 12 × 1.5 = 18 weeks' pay (capped weekly rate applies) |
Whether James's situation genuinely qualifies as redundancy (rather than an ordinary, potentially unfair dismissal) depends heavily on the underlying facts — specifically whether the business need for his role has genuinely reduced, not simply whether his employer wanted to change his terms.
Notice Period Calculator
Calculate UK statutory and contractual notice period plus PILON or garden leave pay.
Open Notice Period calculatorWhat to do if you're facing fire and rehire
- Check whether your employer has genuinely consulted and explored alternatives, documenting this as you go.
- Understand your notice entitlement — you are still owed your normal contractual or statutory minimum notice.
- Consider whether a negotiated outcome (via a union or individually) could improve on the initial proposal.
- Get legal advice before agreeing to significant new terms, or before assuming a refusal automatically means either redundancy pay or an unfair dismissal claim — the outcome depends heavily on the specific facts.
Use the redundancy pay calculator to estimate statutory redundancy pay if your situation genuinely qualifies, and the notice period calculator to check your minimum entitlement before any dismissal takes effect.
Frequently asked questions
What is 'fire and rehire'?
Fire and rehire (formally called 'dismissal and re-engagement') is where an employer dismisses employees who do not agree to a proposed change in their contract terms — such as reduced pay, changed hours, or altered benefits — and then offers to re-employ them on the new terms instead. It is a controversial but currently legal practice in the UK, subject to specific procedural constraints.
Is fire and rehire illegal in the UK?
It is not banned outright, but a statutory Code of Practice on Dismissal and Re-engagement sets out how employers should behave when considering this approach — including a genuine duty to consult, explore alternatives, and only use fire and rehire as a genuine last resort rather than a routine negotiating tactic. Employment tribunals can increase compensation by up to 25% where an employer unreasonably fails to follow the Code.
What happens to my redundancy pay rights if I refuse the new terms?
If you refuse the new terms and your employer dismisses you as a result (rather than re-engaging you on the new contract), this dismissal can, depending on the specific circumstances, be treated as a genuine redundancy if the underlying reason relates to a reduced need for employees, or can be an unfair dismissal if the employer has not followed a fair process — the legal characterisation depends heavily on the specific facts, so seeking advice on your specific situation is important.
Is there a minimum notice period my employer must give before fire and rehire takes effect?
Yes — your employer must still give at least your contractual or statutory minimum notice (whichever is longer) of the dismissal under the old contract, in the same way as for any other dismissal, even where re-engagement on new terms is offered alongside or immediately after that notice period.
What is the statutory redundancy pay calculation if fire and rehire genuinely ends in redundancy?
Statutory redundancy pay is based on age, length of continuous service (capped at 20 years), and weekly pay (capped at a maximum figure reviewed annually), calculated as: half a week's pay for each full year worked under 22, one week's pay for each full year worked aged 22-40, and one and a half week's pay for each full year worked aged 41 and over.
Can I negotiate a better outcome instead of accepting fire and rehire terms?
In many cases, yes — through collective consultation (if a union or employee representatives are involved) or individual negotiation, employees or their representatives can sometimes secure modified terms, a longer transition period, or an enhanced settlement compared with the employer's initial proposal, particularly where the employer wants to avoid the reputational and legal risk of an aggressive, non-compliant fire-and-rehire process.
Does the Code of Practice give employees a direct legal claim?
Not directly on its own — the Code does not create a new standalone right to sue, but tribunals must take it into account in relevant unfair dismissal claims, and can increase (or in principle decrease) compensation by up to 25% depending on whether an employer unreasonably failed to follow it, making compliance a significant financial consideration for employers even without a standalone breach claim.
Can my employer use fire and rehire to cut my pay significantly?
Legally, an employer can propose significant pay cuts through this process, but doing so without genuine consultation, without exploring alternatives, and without a strong underlying business rationale is exactly the kind of conduct the Code of Practice is designed to discourage and that tribunals scrutinise closely if a subsequent unfair dismissal claim is brought.
Should I get legal advice before agreeing to new terms under a fire-and-rehire process?
Strongly advisable, particularly for significant pay or role changes — a solicitor or your union (if you have one) can help you understand whether the process has genuinely followed the Code, whether you have a viable unfair dismissal or redundancy claim if you refuse the new terms, and what a reasonable negotiated outcome might look like given your specific circumstances.
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