Effective: October 2026
The Ban: From October 2026, you cannot dismiss employees to impose changes to their contractual terms – except in very limited circumstances.
Why Now: This follows the P&O Ferries scandal where they dismissed their entire workforce and re-hired on worse terms.
What’s Covered by the Ban?
Automatically Unfair Dismissals
You CANNOT dismiss and re-engage employees to change:
- Pay (salary, hourly rates, bonuses)
- Required working hours
- Pension arrangements
- Shift times and length
- Time off rights (holiday, other leave)
- Other changes to be defined in future regulations (likely benefits)
What’s Still Allowed
- Changes NOT in the above categories will go through normal fairness tests
- Hiring new recruits on different terms (subject to equal pay rules)
- Making pay rises conditional on employees agreeing to changes
- Using existing flexibility clauses in current contracts
The Exception: Financial Collapse
The ban only applies unless your business is facing extreme financial difficulty – essentially financial collapse.
This is a very high bar and won’t cover normal commercial pressures or desire to cut costs.
Fire & Replace – Also Banned
- New Extension: The ban now covers replacing employees with:
- Self-employed contractors
- Agency workers
- Any non-employees doing substantially the same work
Current Law: This is treated as redundancy (potentially fair)
New Law: Will be automatically unfair dismissal (unless financial collapse)
Flexibility Clauses – New Restrictions
What You Can Still Do
- Include flexibility clauses in new hire contracts
- Rely on existing flexibility clauses in current contracts
What You Cannot Do
- Impose new flexibility clauses on existing
- employees through dismissal and re-engagement
- This applies from October 2026
Critical Action Required:
Contract Review
Before October 2026, You Must:
1. Review Your Contracts
- Identify outdated pay structures
- Check pension arrangements that need updating
- Review working hours and shift patterns
- Assess time off entitlements
- Examine flexibility clauses – are they fit for purpose?
2. Make Changes Now
- Any changes to pay, hours, pension, shifts, or time off must be implemented before October 2026
- Negotiate with employees while you still can
- Update flexibility clauses if needed
3. Check Your Workforce Structure
- If you plan to move work from employeesto contractors/agency workers, do it before October 2026
Practical Steps
Immediate Actions
- Contract audit – what terms might need changing?
- Legal review – are your flexibility clauses adequate?
- Commercial assessment – any outdated or unprofitable structures?
- Timeline planning – what can realistically be changed by October 2026?
Negotiation Strategy
- Approach employees early with clear business case
- Consider making changes conditional on pay increases
- Document all discussions and decisions
- Use proper consultation processes
Risk Management
- Don’t delay difficult conversations
- Get legal advice on complex changes
- Consider phased implementation for large changes
- Plan for employees who refuse to agree
What This Means for Your Business
The Reality
- This will make changing employment terms much more difficult
- You’ll need to plan workforce changes well in advance
- New hires may be on different terms to existing staff
- Flexibility clauses become more important than ever
The Opportunity
- Forces proper workforce planning
- Encourages getting contracts right from the start
- May reduce disputes if changes are made properly now
If you would like to know more or would like to talk to us to find out how we can support your company, please email us at info@thelegaldirector.co.uk or call us for an informal chat on 020 3056 8538.
