For years, the approach to contractual change that most employers reached for when negotiations stalled was some version of the same conversation:
“We’ve consulted. They haven’t agreed. We’re going to have to dismiss and re-engage.”
That option is now effectively closed.
Under the Employment Rights Act 2025, it is automatically unfair to dismiss an employee where the principal reason is to re-engage them – or engage someone else – on varied contractual terms. The exceptions are narrow: the employer must show the variation was necessary to eliminate, prevent, or significantly reduce financial difficulties affecting its ability to carry on as a going concern. A desire to cut costs or improve efficiency will not qualify.
The financial stakes have also changed. Automatically unfair dismissal carries uncapped compensation from January 2027. An employer who dismisses 20 employees to change their terms of employment is not facing 20 individual claims with capped awards. They are potentially facing 20 claims with unlimited compensation each.
There is still a lawful route to achieving contractual change. It involves genuine consultation, documented negotiation, and incentivised consent. Done properly, it works. But it requires planning, and it requires a different approach to the process than most businesses are currently taking.
If you are planning restructures, changes to pay structures, or amendments to working arrangements, the old approach needs replacing now!
If this is relevant to anything you’re currently working through, please contact Henry Doswell of Doswell Law on 01233 722942 or by emailing him at henry@doswell-law.com