PolicyLens

Green - Labour market

Ban fire and rehire

Prohibit dismissal and re-engagement to impose worse terms except in genuine insolvency rescue.

Last updated: May 2026.

Read the policy-specific methodology note

Policy baseline

The official ERA analysis costs fire-and-rehire reform at about GBP 98m EANDCB, but a full ban is broader.

  • Official cost is a lower anchor.
  • Distressed firms are the hard case.
  • Redundancy risk may rise.

Core trade-offs

Workers keep existing terms. Employers lose a restructuring tool. In distressed firms, the trade-off may be better terms for survivors against more redundancies.

  • Workers retain contract terms.
  • Employers lose restructuring flexibility.
  • Redundancy risk rises.

Illustrative fiscal impact

+GBP 0.1bn to +GBP 4.0bn. Central estimate: +GBP 0.8bn.

  • Positive numbers mean public-finance pressure; negative numbers mean Exchequer savings.
  • Gross costs are separated from tax, NI and benefit offsets.
  • Private business costs are not automatically fiscal costs.
  • Behavioural responses widen the range materially.
  • This is not an official costing.

Economic impact by 2027-28

  • Jobs: Likely negative in distressed firms if restructuring shifts from terms changes to redundancies.
  • Wages: Protects existing terms for affected workers.
  • Prices: Some firms may raise prices instead of cutting labour costs.
  • GDP / productivity: Likely negative where it blocks viable restructuring or delays adjustment.

Assessment

A ban can stop abusive contract downgrades, but it also removes a tool that some firms use to avoid insolvency or redundancies. The design has to distinguish opportunistic threats from genuine rescue situations.

Confidence: Low. Official costs exist, but a full ban changes restructuring behaviour.

Main risks

  • Redundancy substitution: Firms may choose layoffs where terms changes are barred.
  • Insolvency boundary: The rescue exception may invite litigation and uncertainty.
  • Public contracts: Commissioned providers may seek higher fees instead of cutting terms.

Safeguards

  • Define rescue exceptions tightly.
  • Require financial evidence before exceptions.
  • Monitor redundancies after disputes.

Academic evidence

Autor, Kerr and Kugler, Economic Journal, 2007

Does Employment Protection Reduce Productivity?

Employment-protection changes can reduce productivity where firms face higher firing and adjustment costs.

Supports caution on policies that raise dismissal, scheduling or adjustment costs.

Does Employment Protection Reduce Productivity? (2007)

UK government evidence

Department for Business and Trade, 2026

Employment Rights Act 2025 - Economic Analysis

The ERA economic analysis estimates around GBP 1bn annual direct business cost before social-care bargaining.

Provides official baseline costs and affected groups.

Employment Rights Act 2025 - Economic Analysis (2026)

Department for Business and Trade, 2026

Employment Rights Act 2025 impact assessments

The IA collection separates guaranteed hours, unfair dismissal, fire and rehire, union and equality measures.

Prevents treating broad rights packages as one undifferentiated pledge.

Employment Rights Act 2025 impact assessments (2026)

HM Treasury, 2025

Whole of Government Accounts 2023-24

Whole of Government Accounts report GBP 240.5bn staff costs and GBP 263.7bn purchases in 2023-24.

Anchors paybill and procurement exposure.

Whole of Government Accounts 2023-24 (2025)

Sources

Other Green policies

PolicyLens estimates are illustrative and not official costings.