Employment Rights Act 2025: Government Response on Fire and Rehire, Expenses, Benefits and Shift Patterns
Today, 22nd October 2026 the Government has published its response on how the Employment Rights Act 2025 fire-and-rehire rules will apply to expenses, benefits in kind and shift patterns. It has also launched a consultation on a revised Code of Practice on Dismissal and Re-engagement.
The changes matter where a school or academy trust cannot agree a contractual change with an employee and is considering dismissal and an offer of re-engagement on new terms.
What is changing?
The new law gives stronger protection where fire and rehire is used to change certain important contractual terms, known as “restricted variations”. Where an employee is dismissed in order to make a restricted variation, the dismissal will normally be automatically unfair unless the employer can satisfy the new statutory exception relating to financial difficulties.
The wider restricted variations include reductions in pay, changes to total hours, reductions in leave entitlement and changes to pensions. The Government has now confirmed how specified expenses, benefits and shift changes will fit into the regime. The protections also extend to certain “fire and replace” situations, where an employee is dismissed and replaced by a non-employee carrying out substantially the same role.
Expenses and benefits: what will be protected?
Where they are contractual entitlements, the following will be restricted variations:
The contractual point is important. If an expense or benefit is genuinely non-contractual and provided through a separate policy, changing that policy will not itself be a restricted variation. The Government response also recognizes that a contractual flexibility or variation clause may allow some changes without varying the contract. Whether a clause allows the particular change will depend on its wording and the circumstances, so schools and academy trusts should take care before relying on it.
What does this mean for schools and academy trusts?
This could matter where, for example, contracts contain fixed entitlements to mileage, travel between sites, work-related accommodation expenses or accommodation provided with a role. Schools and academy trusts should check the actual contract, any incorporated collective agreement and any variation wording before making changes.
Which shift changes will be protected?
The Government has chosen a narrow list. A contractual shift change will be a restricted variation where it requires an employee to move:
For these rules, night-time will be 11pm to 6am. Contractual “availability windows” will not be included. The Government also gives the example of moving a daytime shift back by a few hours, without moving into night-time, as a change outside the restricted list.
For schools and academy trusts, the rules may be particularly relevant to caretaking, premises, cleaning, catering, boarding, residential or security roles. A smaller change that remains within weekday daytime working will not fall within these specified shift variations, but it will still need to be handled lawfully and fairly.
What if the change is not a restricted variation?
This does not mean a school or academy trust is free to use fire and rehire for other contractual changes. The Employment Rights Act 2025 introduces additional protections for dismissals used to make “unrestricted variations”. When deciding whether such a dismissal is fair, an Employment Tribunal will consider relevant factors including whether the school or academy trust consulted employees and recognised trade unions about the proposed change.
A revised Code of Practice is also coming
The Government is consulting on a revised Code of Practice on Dismissal and Re-engagement. The existing Code dates from 2024 and requires updating for the new legal framework.
The new fire-and-rehire protections are intended to take effect in March 2027. The Government proposes that the existing 2024 Code will be withdrawn at that point, while the replacement Code is expected to take effect in Summer 2027. This means schools and academy trusts should prepare for the statutory changes rather than wait for the replacement Code.
The updated Code is intended to cover best practice around consultation and reasonable notice of contractual changes. Failure to comply with the Code can lead to an uplift of up to 25% to the compensatory award in relevant unfair-dismissal cases.
What about financial difficulties?
There is a statutory exception relating to financial difficulties, but this should not be read as a general permission to use fire and rehire whenever a school or academy trust is under budget pressure. Whether the exception applies will depend on the statutory test. Schools and academy trusts should take advice before relying on it.
What should schools and academy trusts do now?
The practical message
The Government has taken a targeted approach, but the overall direction is clear: dismissal and re-engagement will become much higher risk. Schools and academy trusts should not assume that a change falling outside the restricted list can simply be imposed. Contract wording, consultation, collective agreements, equality issues and the wider unfair-dismissal rules will remain important.