What is Fire and Rehire?

Full Definition

Fire and rehire (also called dismissal and re-engagement) describes a practice where an employer, unable to secure agreement from employees or their representatives to a proposed change in contractual terms -- for example, reduced pay, altered shift patterns, or changes to benefits -- dismisses the affected employees and immediately offers to re-employ them, usually the next working day, on a new contract containing the changed terms. Employees who accept the new contract keep their job but on worse terms; those who refuse are treated as dismissed and may bring an unfair dismissal claim, though historically employers could often defend such claims by showing a genuine business reason for the change, even where the change was unwelcome to staff. The practice attracted significant public criticism following high-profile disputes, most notably P&O Ferries' 2022 mass dismissal of nearly 800 seafarers without consultation, which was unlawful in that case because of a separate failure to notify the government in advance, though it highlighted the wider fire-and-rehire practice to a broad audience. In response, a statutory Code of Practice on dismissal and re-engagement took effect in July 2024, requiring employers to consult properly, consider alternatives, and not use fire and rehire merely as a negotiating tactic -- an employment tribunal can increase compensation by up to 25% for unreasonable failure to follow the Code. The Employment Rights Act 2025 goes further, generally treating a dismissal for refusing a contract variation as automatically unfair unless the employer can show the changes were necessary to avoid serious financial difficulties threatening the business's survival and that requirement is met alongside proper consultation, significantly narrowing the circumstances in which fire and rehire can lawfully be used.

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