Fire and Rehire Under the Employment Rights Act 2025: The Date That Actually Matters Is January

Almost everything written about fire and rehire right now says the protections arrive in March 2027. That is a Government intention, not a commencement date, and no statutory instrument has brought the substantive provisions into force. Six commencement regulations have been made and the latest, SI 2026/1065 of 1 October 2026, does not mention section 28 at all.

Meanwhile the date that will actually catch employers is 1 January 2027, and it has nothing to do with fire and rehire specifically.

Why 1 January 2027 is the real deadline

On that date section 25 of the Employment Rights Act 2025 cuts the unfair dismissal qualifying period from two years to six months. Section 25(3) also does something that gets far less attention: it omits section 124 of the Employment Rights Act 1996 entirely. Section 124 is the cap on the compensatory award. From 1 January 2027 there is no cap.

Now read the transitional rule. Regulation 4(1) of SI 2026/559 provides that the amendments have effect in any case where an employee is dismissed before 1 January 2027 but the effective date of termination falls on or after that date, and do not have effect where the effective date of termination falls before it.

It is the effective date of termination that governs, not the date notice is given. An employer serving notice in November or December 2026 with termination landing in January 2027 gets the new law: a six-month qualifying period and an uncapped award. Combined with the extension of tribunal time limits from three to six months on 1 October 2026, the exposure profile of a contract variation exercise changes sharply at the turn of the year, months before fire and rehire itself commences.

The practical counsel for anything already in train is blunt: land the effective date of termination before 1 January 2027 if you can, and get agreement rather than imposing it. Our guide to the six-month qualifying period sets out that change in full.

What section 28 actually does — three limbs, not one

Section 28 inserts new sections 104I, 104J and 104K into the 1996 Act. Most commentary covers the first and ignores the third, which is a mistake.

Section 104I: restricted variations, automatically unfair

A dismissal is automatically unfair where the principal reason is either that the employer sought to vary the contract to make a restricted variation and the employee did not agree, or that the dismissal was to enable the employer to employ another person, or to re-engage the employee, under a varied contract carrying out the same or substantially the same duties.

Note the second route needs no refusal by the employee at all, and expressly covers re-engaging the same person.

Critically, automatic unfairness attaches only to a closed statutory list of restricted variations, not to contract variations generally. The list in section 104I(5) covers a reduction or removal of any sum payable in connection with the employment; a variation of the measure where pay is determined by reference to work done or results achieved; any variation of terms relating to pensions or pension schemes; a variation of the number of hours an employee is required to work; a variation of the timing or duration of a shift meeting conditions to be specified in regulations; a reduction in time off entitlement; anything further specified by regulations; and one more that deserves its own paragraph.

Section 104I(5)(h) makes it a restricted variation to include in a contract a term enabling the employer to make any of the preceding variations without the employee agreement. In other words, inserting a flexibility clause over pay, hours, pensions or time off is itself a restricted variation. Employers whose instinct is to respond to this regime by bolting variation clauses onto contracts will walk straight into it.

Section 104J: everything else

Where the refused variation is not on the restricted list, section 104J applies and the dismissal is not automatically unfair. The ordinary fairness question is decided instead, with mandatory factors: the reason for the variation, any consultation with the employee, any consultation with a recognised union or other authorised representative, and anything offered to the employee in return for agreeing.

There is an asymmetry worth planning around. Sections 104I and 104K are added to the section 108(3) exemptions, so they need no qualifying period at all. Section 104J is not, so those claims still need six months service. Expect claimants to plead 104I to get round the qualifying period.

Section 104K: fire and replace with non-employees

This is the sleeper. It is automatically unfair to dismiss an employee to enable the employer to replace them with an individual who is not an employee of the employer, where the replacement carries out the same or substantially the same activities under a contract other than a contract of employment, and the dismissal is not wholly or mainly attributable to the requirements of the business for those activities having ceased or diminished.

Section 104K(2)(b) confirms it covers the case where the person re-engaged as a contractor is the one who was dismissed. So any plan to replace employees with consultants, contractors or personal service company arrangements doing substantially the same work needs stress-testing against this section. Genuine redundancy stays outside it. Dressed-up redundancy does not. Almost no HR commentary covers this alongside fire and rehire.

The exception is a going-concern test, not a cost test

The statute does not use the word severe, and plenty of commentary that says it does is wrong. Under section 104I(8), for an employer that is not a local authority, automatic unfairness does not apply if the employer shows that the reason for the restricted variation was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer ability to carry on the business as a going concern; and that in all the circumstances the employer could not reasonably have avoided the need to make the variation.

Four points of precision. The test is viability, not hardship or cost pressure. The burden sits squarely on the employer, on both limbs. Limb (b) is qualified by reasonableness, so it is not absolute unavoidability as some commentary states. And the exception is on the face of the Act; regulations can only add further fairness factors, not redefine it.

The most frequently mangled point concerns the standard of review. Section 104I(10) requires a tribunal to apply the same principles as would be applied by a court on an application for judicial review, but only for a public sector employer or a local authority. Private employers do not get that deference. A tribunal will decide for itself whether a private employer could reasonably have avoided the variation.

Local authorities face a materially harder route again: the exception is unavailable unless a relevant intervention direction is already in effect at the time of dismissal, specifying financial difficulties as a reason and containing provision on financial management or governance.

Consultation is not a gateway to the exception

This matters for process design. Consultation is not a precondition of the exception. Section 104I(11) operates only once the employer has established the financial-difficulties conditions, and then feeds consultation and what was offered in exchange into the ordinary fairness question.

So the accurate statement is that establishing the exception removes automatic unfairness and returns the case to the ordinary unfair dismissal test. An employer can clear the financial gate and still lose on process.

The Code of Practice gap nobody is talking about

The statutory Code of Practice on Dismissal and Re-engagement came into effect on 18 July 2024 under the Code of Practice (Dismissal and Re-engagement) Order 2024. It remains in force, unrevised, and it carries real money: under section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992 a tribunal can increase an award by up to 25 per cent where the employer has unreasonably failed to comply, on claims listed in Schedule A2. The symmetry is worth noting too, because the same 25 per cent can be applied against an employee who unreasonably fails to comply.

Here is the part that has not been reported. The Government is not revising that Code. The consultation published on 22 October 2026, which closes at 11:59pm on 17 December 2026, states that the Government is revoking the existing Code in March 2027, simultaneously with the entry into force of the new protections, and that the new statutory Code will come into force in Summer 2027.

That leaves a period of several months in which the new automatic-unfairness regime is live and no statutory Code governs the process, with nothing to attach the 25 per cent uplift to for these cases. Neither the consultation nor the Acas guidance addresses what fills the gap. Any employer planning a variation exercise for spring 2027 should assume process will still be scrutinised and should follow the draft Code regardless.

The draft replacement retains the uplift and the overall architecture. Two lines from it are worth keeping: all parties should act in good faith with an aim of reaching an agreed outcome, and a threat of dismissal should not be used as a negotiating tactic to put undue pressure on employees.

What the regulations will add

The Government response of 22 October 2026 confirms decisions on the enabling regulations, which have not yet been laid. Certain travel expenses including mileage, accommodation expenses and accommodation as a benefit in kind will be in scope of restricted variation. Changes to share schemes will not be. On shift patterns, a variation will be restricted where an employee is moved into night or day work, or weekend or weekday work, having not previously been required to work those periods, with night defined as 11pm to 6am. Availability windows are excluded: the restriction is limited to changes to the period when employees are scheduled to work.

What to do now

Before commencement, current law still applies and dismissal for refusing a variation can be fair as some other substantial reason under section 98(1)(b). The 2024 Code applies and the uplift is live. Collective consultation under section 188 will routinely be triggered, because the dismissals count even where re-engagement is offered, and the maximum protective award doubled from 90 to 180 days pay on 6 April 2026.

After commencement, the discipline is to triage every proposed change against the section 104I(5) list, resist adding flexibility clauses, and build the financial evidence contemporaneously rather than reconstructing it for a tribunal: board papers, management accounts, cashflow forecasts, the alternatives considered and why each was rejected. Limb (b) is where these cases will be won and lost.

And watch for the commencement instrument. March 2027 becomes real only when a further commencement regulation appears alongside the expenses and shift-pattern regulations. Until both are laid, the date can move again, as it has twice already: October 2026 in the July 2025 roadmap, January 2027 in the February 2026 revision, March 2027 as of 22 October 2026. The GOV.UK timeline carries its own caveat that all future dates remain subject to parliamentary processes and may change. Plan to the date; do not rely on it. For the wider sequence see our guide to what the Employment Rights Act 2025 changes, and for the procedural change already in force, the extension of tribunal time limits.