Employment Rights Act 2025: Latest update on fire and rehire and family leave protections

The most immediate change for employers is the timing. The fire and rehire provisions are now expected to take effect in March 2027 rather than January. We also have a clearer idea of which contractual changes will be caught and how limited the exceptions are likely to be.

Fire and rehire: what do we now know?

The Employment Rights Act will make it automatically unfair to dismiss an employee in order to force through changes to certain core contractual terms, known as ‘restricted variations’. The Government has also published a revised Code of Practice on Dismissal and Re-engagement for consultation.

The restricted terms include pay, total hours, leave and pensions, as well as certain changes to shift patterns. The rules also cover introducing a variation clause that would allow an employer to make one of these changes without agreement.

The detail on shift patterns is now clearer. Moving an employee between day and night working, or between weekday and weekend working, where they were not previously required to do so, will be caught. Smaller adjustments, such as changing the timing of a daytime shift, will not.

We also know how expenses and benefits will be treated. Most will sit outside the restricted variation rules, although travel and accommodation expenses and long-term accommodation provided as a benefit will be exceptions. Share schemes will not be caught.

These protections apply to contractual entitlements. Employers will therefore need to be clear about what is actually contractual before starting a change process. If a wider package contains even one restricted variation, the automatic unfair dismissal provisions will apply to that package.

What if the employer is in financial difficulty?

There will be an exception, but it is deliberately narrow.

The draft Code sets out different considerations for private sector employers, public bodies and local authorities. In broad terms, serious financial difficulty will need to threaten the organisation’s ability to continue operating or, in the public sector, to carry out its statutory functions. There must also be no reasonable alternative. Financial pressure or the fact that a proposed change would save money will not, on their own, put an employer within the exception.

Other contractual changes, such as changes to location or job role, are not restricted variations in the same way. That does not give employers a free hand to impose them. Dismissal and re-engagement will still be subject to a tougher fairness test and the requirements of the Code.

One slightly odd feature of the timetable is that the current Code is due to disappear in March 2027, while the replacement is not expected until the summer. The consultation on the revised Code remains open until 17 December 2026.

A higher bar for dismissals during pregnancy and family leave

The Government has also confirmed how the new dismissal protections for employees who are pregnant, on qualifying family leave or have recently returned to work will operate.

The five potentially fair reasons for dismissal will remain. What changes is the test employers will have to meet during the protected period. Instead of the usual ‘band of reasonable responses’ test, an employer will need to show that dismissal was a proportionate means of achieving a legitimate aim.

A tribunal will be able to consider whether dismissal was actually necessary, rather than simply whether the employer’s decision fell within a reasonable range. In practice, employers will need to have considered whether there was a less severe alternative, such as changes to the role, additional support or suitable alternative work.

The protection will apply from day one and, for pregnancy, will begin when the employee tells their employer they are pregnant. Protection will also extend beyond maternity leave and apply to adoption leave and certain other forms of family leave, including shared parental leave and neonatal care leave.

The existing enhanced redundancy protection will remain alongside the new rules.

These changes are expected to take effect in October 2027, with further guidance to be developed with Acas.

What should employers do now?

Neither set of changes is in force yet, but there is enough clarification now for employers to start looking at where they may be affected.

For organisations considering changes to pay, hours, pensions or shift patterns, the first question should be whether any part of the proposal will amount to a restricted variation. This is particularly important where several contractual changes are being proposed together.

Dismissal decisions involving pregnancy and family leave will need to be more carefully considered. It will no longer be enough to show that dismissal was within the range of decisions a reasonable employer might have made. Employers will need to be able to explain why dismissal was justified and what alternatives were considered.

For now, the revised fire and rehire Code remains under consultation, so there is more detail still to come. In the meantime, employers should review any planned contractual changes and make sure managers understand the higher threshold that will apply to dismissals during pregnancy and family leave.

Nina Seymour is Head of Invicta Law’s Employment, Pensions and Education Group. She is an experienced employment solicitor with a long career supporting local authorities and senior officers.