Fire and Rehire: Why Employment Contracts Need Your Attention Now

“Fire and rehire” has been a phrase many employers have become familiar with over recent years.

It refers to the practice of dismissing an employee and then offering to re-engage them on new terms and conditions. In some cases, businesses have used this approach when they need to make changes to pay, hours, benefits, location, duties or other contractual terms.

However, the law around fire and rehire is changing and employers need to pay attention. The direction of travel is very clear: employers will be expected to consult properly, act reasonably, and only use dismissal and re-engagement as an absolute last resort. The days of relying on outdated contracts, vague flexibility clauses or rushed consultation processes are coming to an end.

Why is fire and rehire changing?

Fire and rehire has become increasingly controversial because of the impact it can have on employees. When handled badly, it can leave employees feeling forced into accepting new terms, damage trust, harm workplace culture and create significant legal risk for the employer. The current statutory Code of Practice on dismissal and re-engagement already makes it clear that employers should explore alternatives, consult in good faith and avoid using dismissal as a threat or negotiating tactic. Further employment law reforms are expected to make the position even stricter, with stronger protections for employees where dismissal is used to force through contractual changes. For employers, this means that changing contracts will need to be handled with far more care.

Why employment contracts matter

Your employment contracts are the foundation of the working relationship. They set out what has been agreed between the employer and employee, including pay, hours, duties, place of work, notice, benefits, flexibility and other key obligations. When contracts are outdated, unclear or too rigid, employers can find themselves in a difficult position when business needs change.

For example, you may need to:

• change working hours or shift patterns.

• update job duties as the business grows

• introduce new benefits or remove outdated ones

• change place of work or hybrid working arrangements

• update notice periods

• introduce new policies or procedures

• reflect changes in employment law

• deal with restructures, mergers or commercial pressures

If the contract does not give you the right level of flexibility, or if the wording is unclear, making changes can become much harder. That does not mean employers can simply write anything they like into a contract and rely on it later. Flexibility clauses must still be reasonable, clear and used properly. However, well-drafted contracts give employers a much stronger starting point and reduce the risk of having to consider more drastic options later.

The risk of relying on old contracts

Many businesses are still using contracts that were created years ago and have never been properly reviewed.

This can create several problems.

Some contracts no longer reflect how the business actually operates. Some refer to outdated job titles, old policies or benefits that are no longer offered. Others contain clauses that are too vague to be useful or too broad to be safely relied upon. In some cases, employers assume they have the right to make changes when, in reality, the contract does not support that. That can lead to disputes, grievances, breach of contract claims, constructive dismissal risks, or unfair dismissal claims if the matter is not handled properly. With the law tightening around fire and rehire, the quality of your contracts and the process you follow will matter more than ever.

Consultation is still key

Even where a contract contains flexibility, employers should not assume they can impose changes without discussion.

Good consultation remains essential.

Employees should understand what is being proposed, why the change is needed, how it may affect them, and whether there are any alternatives.

Employers should listen to feedback and be able to show that they have genuinely considered employee views before making a decision. This is not just about legal compliance. It is also about trust.

When people understand the reason for change and feel they have been treated fairly, they are far more likely to engage with the process, even if the change itself is not easy.

Practical tips to help employers avoid risk

The aim should always be to avoid getting to the point where dismissal and re-engagement is even being considered. A proactive approach to contracts, communication and record keeping can significantly reduce risk.

What should employers do now?

Now is a sensible time for employers to review their employment contracts and wider HR documentation.

In particular, businesses should check whether their contracts:

• reflect current working arrangements

• contain clear and appropriate flexibility clauses

• match the policies and benefits actually in place

• comply with current employment law

• are suitable for the size and structure of the business

• support future business change without creating unnecessary risk

It is also important to make sure managers understand that changing terms and conditions is not simply an admin exercise. It needs to be planned, communicated and managed carefully.

A contract review is not just a compliance task

Reviewing contracts is not just about avoiding legal problems. It helps create clarity for both the business and its employees. It can reduce misunderstandings, support better conversations, and give the business more confidence when change is needed.

As employment law continues to evolve, businesses that take a proactive approach will be in a much stronger position than those waiting until a problem arises. Fire and rehire should never be the default approach to changing employment terms. It should be a last resort.

The better approach is to make sure your contracts, policies and people processes are up to date, legally compliant and fit for the way your business operates now.

If you have not reviewed your employment contracts recently, now is the time to do it.

The Affable Partnership can support you with contract reviews, updates to employment documentation and guidance on managing contractual change in a fair, compliant and commercially sensible way.