Government Delays Fire And Rehire Reforms To March 2027 And Publishes Revised Code
The Government has published a package of documents taking forward the fire and rehire reforms contained in the Employment Rights Act 2025, while confirming that implementation has been pushed back for a second time, from an original start date of October 2026 to January 2027 and now to March 2027.
Alongside the updated timetable, the Government has issued a draft revised Code of Practice on Dismissal and Re-engagement, a consultation on that draft Code running until 17 December 2026, and its response to an earlier consultation on how the new rules will apply to expenses, benefits in kind and shift patterns. The draft revised Code is available here: Revised code of practice on dismissal and re-engagement
Background
The Act introduces a new concept of “restricted variations”, covering changes to core contractual terms such as pay, total working hours, leave entitlement, pensions and certain shift patterns. Dismissing an employee in order to impose one of these changes, or to replace them with someone who is not an employee doing substantially the same role, will be automatically unfair unless the employer can rely on a narrow financial difficulties exemption.
Where a proposed change falls outside the restricted variations, such as a change to location or job role, dismissal will not be automatically unfair, but will instead attract enhanced unfair dismissal protections, under which tribunals must consider whether the employer shared information and consulted meaningfully before any dismissal took place.
What Has Been Confirmed
On expenses and benefits, the Government has confirmed that travel expenses, including mileage, accommodation expenses and accommodation provided as a benefit in kind will all be treated as restricted variations and given the same protection as core pay. Changes to share schemes will not be caught.
On shift patterns, restricted variations will be limited to a change from day to night working or vice versa, and from weekday to weekend working or vice versa, with night defined as 11pm to 6am. The Government has accepted this produces some odd outcomes, since a small change that crosses one of these lines will be caught, while a larger change that stays on one side of it, such as a significant reshuffle of daytime shifts, will not. It takes the view that the simplicity of a clear rule justifies this trade off.
The draft Code of Practice sets out how the financial difficulties exemption will operate in practice. A private sector employer will need to show that the difficulties threaten the viability of the business as a going concern, a public sector employer that they threaten the ability to carry out its statutory functions, and a local authority that they have already prompted a formal government direction over its financial management. In every case, the employer must
also show that it shared information and consulted meaningfully, that the difficulties are sufficiently serious and immediate, and that there was no reasonable alternative to the dismissal.
The new statutory protections will take effect in March 2027, at which point the current 2024 Code will be revoked. The revised Code itself will not come into force until the summer of 2027, leaving a gap during which the new rules will apply without updated guidance in place.
What Employers Should Do Next
● Review any planned changes to terms now: major proposals affecting pay, hours, leave, pensions or the specific shift changes described above should be reassessed against the restricted variations regime well before March 2027, since dismissing to impose them will be very difficult to defend once the Act is in force.
● Do not overlook expenses and shift patterns: travel and accommodation costs and benefits, and day to night or weekday to weekend shift changes, will carry the same protection as core pay, even though they may not currently be treated with the same caution.
● Keep consultation and evidence on file: whether or not a change is a restricted variation, tribunals will look closely at what information was shared and how meaningfully employees were consulted, so this should be documented as the process happens rather than reconstructed afterwards.
● Consider responding to the consultation: employers with views on the draft Code of Practice have until 17 December 2026 to respond before it is finalised.
As always, this advice is general in nature and should be tailored to the circumstances of any individual case. As an RMI member, you have access to the RMI legal advice line, as well as a range of industry experts who can assist you. If you find yourself facing any of the issues outlined above, please contact us at any stage for advice and support as appropriate.
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