Fire and rehire: consultation on expenses, benefits and shift patterns

Background

The Employment Rights Act 2025 introduces new restrictions on the use of dismissal and re-engagement to force changes to core contractual terms. Once in force, it will be automatically unfair to dismiss an employee in order to impose changes to certain contractual terms, known as "restricted variations" unless the employer is in severe financial difficulty and has no reasonable alternative.

Pay, hours, pensions and leave are already identified as restricted variations under the new framework. However, the Act also gives the government powers through regulations to clarify whether changes to expenses, benefits in kind and shift patterns should also fall within this automatic unfair dismissal regime. This consultation seeks views on how those powers should be used.

The government also has the power to introduce new categories of restricted variations through regulations. The consultation states that currently the government does not intend to make any further restricted variations categories but that it will keep this under review.

Expenses and benefits in kind

The first part of the consultation considers whether contractual expenses and benefits in kind should be treated in the same way as pay for fire and rehire purposes.

The government’s starting point is that expenses and benefits are different in nature from core remuneration. They are often governed by policies, are more likely to change over time, and may need to be adjusted to reflect operational realities such as cost pressures, changes in suppliers or a desire to standardise terms across a workforce.

Two options are presented, albeit the government states it is open to alternative views. The government’s preferred approach would exclude all expenses and benefits in kind from the automatic unfair dismissal regime. Employers could still face ordinary unfair dismissal claims if dismissals were used to impose such changes, but dismissals would not be automatically unfair simply because they related to expenses or benefits.

An alternative option would give higher protection to a narrow category of expenses or benefits that might, in some cases, resemble pay, such as certain accommodation arrangements, travel expenses or contractual share schemes. The consultation acknowledges that this approach would be difficult to define clearly and could significantly reduce employers’ flexibility.

The consultation indicates a preference for keeping expenses and benefits outside the automatic unfair dismissal regime, placing greater emphasis on consultation and the application of ordinary unfair dismissal principles.

Shift patterns

The second part of the consultation looks at changes to contractual shift patterns.

The government recognises that employers often need flexibility to change working patterns to meet business needs, but also accepts that some shift changes can have a significant impact on employees’ lives. The consultation therefore focuses on whether a limited category of particularly disruptive shift changes should be protected.

The preferred option would treat only the most extreme changes as a restricted variation, namely moves from day working to night working (or vice versa), and from weekday working to weekend working (or vice versa).

The alternative option would be to exclude all shift pattern changes from the scope of a restricted variation. Shift patterns would remain subject to ordinary unfair dismissal protections, with tribunals expected to scrutinise the employer’s reasons, consultation and overall reasonableness. However, it would not be automatically unfair to force these changes.

The consultation also asks whether certain changes to contractual availability windows should attract similar protection, although no firm proposal is made at this stage.

Learning points for employers

Employers should expect increasing limits on the use of fire and rehire, even where automatic unfair dismissal does not apply. Enhanced scrutiny of consultation, alternatives and proportionality is built into the new framework.

This consultation underlines the importance of clear contractual drafting. Employers may wish to review how expenses, benefits and shift arrangements are documented, including whether flexibility clauses and policy wording still reflect how changes are intended to be made in practice.

The consultation closes on 1 April 2026. Regulations and further updates to the Code of Practice on dismissal and re-engagement are expected to follow, making this a good point to take stock of contractual change strategies and internal processes. 

For more information or advice, please contact Jessica Scott-Dye in our Employment team.