ERA 2025 Newsflash: fire and rehire, enhanced dismissal protection for new mothers, updated timeline

Restricting fire and rehire and fire and replace

Under the ERA 2025, it will become automatically unfair to dismiss an employee for refusing to agree to changes to certain core terms of their contract (referred to as "restricted variations"). Dismissing an employee to make other contractual changes (non-restricted variations) will not be automatically unfair, but employment tribunals will have to take certain specified factors into account when assessing the fairness of such dismissals.

Consultation on a revised code of practice on dismissal and re-engagement

It was anticipated that these measures would come into force on 1 January 2027, but the government has now confirmed that the implementation date has been pushed back to March 2027. That does mean that employers wanting to and able to introduce a "power to vary" clause allowing them to change terms which they are otherwise prohibited from doing through a fire and rehire or fire and replace process have until March 2027 to do so.

From that date, firing and rehiring employees or firing and replacing them to introduce such a clause will be automatically unfair, unless the financial difficulties exemption explained below applies. As a result of the changes to the law on fire and rehire, the government plans to revoke the existing Code of Practice on Dismissal and Re-engagement 2024 (“the 2024 Code”). Please see our alert on the 2024 Code here. The Government is now consulting on the content of the draft revised statutory Code of Practice on Dismissal and Re-engagement ("the draft Revised Code), which it has said will come into force in Summer 2027.

Scope and consequences: As with the 2024 Code, the Revised Code will apply regardless of the number of employees affected by the proposals, and regardless of the employer's reasons for seeking to make the changes, but it will not apply to redundancy dismissals. The Revised Code will also have the same consequences as the 2024 Code. Where the Revised Code applies, employment tribunals will be able to uplift an employee’s compensation by up to 25% if an employer unreasonably fails to comply, or reduce any award by up to 25% where the employee has unreasonably failed to comply.

Key points to note about the draft Revised Code:

• The concept that employers, employees, and their representatives should act reasonably and consider alternatives, actively engage in meaningful consultation with a view to reaching an agreed outcome, and only use dismissal and re-engagement as a last resort remains unchanged
• The draft Revised Code contains new sections highlighting that a dismissal in order to make one or more restricted variations to an employment contract will be automatically unfair unless the employer meets the requirements of the financial difficulties exemption
• The draft Revised Code provides a definition of restricted variations as "core" contractual terms that employers are not allowed to "force employees into"
• The draft Revised Code makes it clear that the financial difficulties exemption is the only escape route from an automatic unfair dismissal claim for dismissing an employee to make a restricted variation or replacing the employee with a non-employee on amended terms that include a restricted variation
• On non-restricted variations, which are subject to an enhanced ordinary unfair dismissal test, a new section states that an employer must have made "exhaustive attempts to reach agreement on contractual changes" for a dismissal to be fair
• The information sharing section now states that when employers provide information to employees or their representatives about the changes, this should include "whether this is a restricted or non-restricted variation(s) and why this variation is important"
• The fire and replace section of the draft Revised Code flags that employers should be aware that there are limited circumstances where fire and replace will be lawful, and cautions them against using redundancy processes to pursue changes to terms and conditions that could not be agreed
• The draft Revised Code states that whether or not the right to be accompanied arises, it is good practice to allow employees to be accompanied at a formal meeting

The consultation closes on 17 December 2026 and can be found here. The draft revised Code of Practice can be found here.

Changes to expenses, benefits in kind and shift patterns

The government consulted earlier this year on whether changes to certain expenses, benefits in kind and shift patterns should be considered restricted variations (see our article here).

The government's response to this consultation confirms that the only types of changes to expenses and benefits in kind that will be treated as restricted variations are changes to contractual travel expenses (including mileage), contractual accommodation expenses, and long-term accommodation where this is provided as a contractual benefit in kind. Where these types of expenses and benefits in kind do not form part of an employee's contract, e.g. if they are covered in a non-contractual policy, then changes to them will not be restricted variations. Where they do form part of the contract, but the contract provides flexibility for the employer to make changes to them, e.g. in a variation clause, those changes will be permitted within the parameters of the contractual flexibility provided.

Changes to share schemes will not be considered restricted variations.

As for changes to shift patterns, the consultation response confirms that the following changes will be restricted variations:

• A change requiring the employee to work during the night (11pm to 6am) where they were not previously required to do so
• A change requiring the employee to work during the day where they were not previously required to do so
• A change requiring the employee to work at the weekend where they were not previously required to do so
• A change requiring the employee to work on a weekday where they were not previously required to do so

Changes to availability windows, where an employee may be required to work within a range of hours specified in a contract, will not be restricted variations. Nor will more minor changes, such as pushing a shift back or forwards a few hours during the daytime. While dismissing an employee to make these types of non-restricted variations will not be automatically unfair, they still be caught by the fire and rehire provisions, with tribunals having to take specified factors into account when assessing the fairness of the dismissal.

Timeframe for implementation

The consultation response confirms that the new regime restricting fire and rehire will not take effect in January 2027 as previously planned. Instead, regulations will bring it into force in March 2027. However, as noted above, the new Code of Practice on dismissal and re-engagement is only expected to be brought into effect in Summer 2027.

Enhanced dismissal protection for pregnant employees and new mothers

Under the ERA 2025, employers will be prohibited from dismissing an employee who is pregnant, is on maternity leave, or has returned from maternity leave within the past six months, except in certain specified circumstances - to be set out in regulations. 

Nature of protection

As we reported here, the consultation on how this enhanced protection should operate had suggested that one or more of the five potentially fair reasons for dismissal (conduct, capability, redundancy, illegality, and some other substantial reason) could be narrowed or even removed altogether. However, the government has confirmed in its consultation response that all five potentially fair reasons will be retained. Instead, the test for assessing the fairness of dismissal for employees to whom the enhanced protection applies will be strengthened from the current band of reasonable responses test to a proportionality test. An employer will therefore be required to justify the dismissal as a proportionate means of achieving a legitimate aim.

Employers will be familiar with the proportionality test as it operates as a defence to various discrimination claims under the Equality Act 2010. The government considers that a focus on proportionality will allow relevant factors to be taken into account and that it will strengthen protection for employees while retaining flexibility for employers to manage genuine issues. In practice, the proportionality test will require employers to demonstrate both their legitimate business aim, and that dismissal is a proportionate means of achieving that aim. This will require the employer to consider whether there are any alternative ways of achieving the aim whose impact on the employee would be less severe. The consultation response flags that employers will be expected to consider alternatives to dismissal where appropriate and that this will be reflected in government guidance.

Duration of protection

As with protection from discrimination, the enhanced protection will be a day one right, with no qualifying period. However, it will only apply once an employee has informed the employer that they are pregnant. The government proposes that this information may be given verbally or in writing. If that is how the law is written, this could be a source of disputes, with employees saying "I told x" and managers saying "I have no memory of being told this." Protection will continue throughout maternity leave and for six months following the employee's return to work.

Where there is no entitlement to maternity leave, the enhanced protection will end two weeks after the end of the pregnancy.

Extension of protection to other types of family leave

The consultation response confirms that the enhanced protection will also apply to employees taking other types of family leave, as follows:

• Adoption leave - during leave and for six months after return to work
• Shared parental leave, neonatal care leave, bereaved partner's paternity leave - during leave and for six months after return to work where the employee took at least six continuous weeks of leave

Interaction with other existing protections

Existing protections from discrimination and detrimental treatment because of pregnancy and maternity leave, and priority rights to suitable alternative vacancies in a redundancy situation will remain unchanged. The new enhanced protection from dismissal will sit alongside these rights.

Timing of implementation

The government will produce regulations to implement these changes, which it intends to take effect in October 2027. The government also plans to produce guidance on the changes.

Updated implementation timeline

The government has updated its ERA 2025 implementation timeline to reflect not just the planned dates for entry into force of the changes discussed above, but also several other ERA 2025 measures. Key newly confirmed dates for employers to be aware of are:

• As noted above, the fire and rehire protections are expected to take effect in March 2027
• The new organisation-wide threshold for collective redundancy consultation is expected to take effect in April 2027
• The prohibition of non-disclosure agreements relating to harassment and discrimination is expected to take effect in September 2027
• As noted above, enhanced dismissal protection for pregnant employees, new mothers, and employees on and returning from other types of family leave is expected to take effect in October 2027
• Changes to flexible working are also expected to take effect in October 2027

In the face of wide-ranging concerns about the complexities of complying with them, the date for introduction of rights to guaranteed hours, reasonable notice, and payments for short notice shift cancellations and changes for zero and low-hours workers is still to be confirmed.

What does this mean for employers?

The approach the government has taken to enhanced dismissal protection for pregnant employees and new mothers is amongst the most measured of the options that was put forward for consultation and will therefore come as something of a relief to employers. In particular, employers will be reassured that enhanced protection will not be triggered until an employee has informed them of their pregnancy, and that they will still be able to rely on all of the potentially fair reasons for dismissal. That said, a proportionality test will be much harder for employers to satisfy than the existing range of reasonable responses test, not least because of the requirement to consider whether a less severe alternative could suffice to achieve the employer's legitimate aim.

The fire and rehire provisions remain fiendishly difficult and far-reaching. The fact that employers have longer to prepare for their introduction is therefore helpful, The government's decision to designate only the most significant changes to shift patterns as restricted variations will be welcomed by employers in sectors that rely on shift workers, such as retail, hospitality, and social care. However, as noted above, even more minor shift pattern changes will fall within the broader restrictions on fire and rehire.

The draft Revised Code makes it clear employers can still agree contract changes with their employees, but gives a very firm signal that unless there are financial difficulties employers should not be using fire and rehire and fire and replace to change contractual terms. The draft Revised Code is much more restrictive than the 2024 Code.

While the financial penalties for breach of the Revised Code remain the same, the risk in trying to bring about contractual changes which are unagreed is much higher given the right to bring an automatic unfair dismissal claim with uncapped compensation. As we have previously reported, the current compensation cap is to be removed from 1 January 2027. It is good news that the introduction of the fire and rehire provisions has been pushed back so employers have longer to prepare for them.

As for the more staggered ERA 2025 implementation timeline, the additional breathing space this provides for employers is welcome, as it means that employers will not be contending with as many different measures taking effect on the same date.