Preparing for change: Employment and Immigration law reforms affecting UK manufacturers

Fire and rehire

“Fire and rehire” refers to a practice often used by employers as a last resort where they cannot get agreement from employees on a change to their terms. In effect, employees are dismissed under their current contracts and offered new employment on the revised terms.

Manufacturers, who typically have large workforces on standard terms and conditions, have historically been more likely to make use of such strategies than employers in other sectors, for example in implementing changes in shift patterns or overtime arrangements.

The practice of “fire and rehire” has been highly controversial for some time, given the imbalance of bargaining power between the employer and employee, and the government is keen to restrict its use. The Employment Rights Act 2025 (ERA) therefore provides that dismissals for failing to agree a “restricted variation” of contract (expected to concern pay, hours and time off) will be automatically unfair. There will be only a very limited exception, where an employer can demonstrate both that the changes were necessary for the business to be able to carry on as a going concern, and that they couldn’t reasonably have avoided the need to make the variation. This change is expected to take effect in January 2027.

How can we prepare? Prioritise any change to terms exercise now, before the restrictions come in. In areas where future contractual changes are likely, such as to employees’ shift patterns, consider including specific flexibility clauses in both existing and new contracts (whilst noting the limitations on their use).

Unfair dismissal

Currently, with some limited exceptions, only employees with two or more continuous years’ service have the right not to be unfairly dismissed. This means it has generally been easier to dismiss an employee before the two-year mark, affording employers some flexibility to assess employees’ suitability for the role and the business. Further, employers have also benefited from an upper limit on compensation for most unfair dismissal claims, which is currently the lower of one year’s salary or £123,543.

From 1 January 2027, the qualifying period for unfair dismissal claims will be reduced from two years to six months under the ERA, meaning all employees with at least six months’ service on 1 January 2027 will have protection from unfair dismissal. Employees will also have twice as long to bring their claims from 1 October 2026, with the limitation period doubling from three to six months. The ERA also intends to remove the cap on compensation for successful unfair dismissal claims from 1 January 2027.

Labour intensive manufacturing businesses are likely to feel the impact of these changes, particularly the more expansive unfair dismissal protection.

How can we prepare? It will be important for employers to ensure their recruitment practices are bringing in the right people; and that managers are aware of the change, conducting regular reviews, and making the best use of probationary periods. Shorter probationary periods should be considered, leaving sufficient time to make and effect outcome decisions before six months’ service. The probationary outcome meeting cannot be left to drag on past the six-month mark. Employers may need to be more decisive when considering suitability for the role at an early stage or otherwise be prepared to carry out thorough performance management processes once an individual obtains protection from dismissal.  Employers should also take care to apply notice provisions correctly, including statutory minimum notice periods, to avoid inadvertent unfair dismissal exposure.

Zero hours

From 2027, it is expected that employers will have an ongoing duty to offer guaranteed hours to zero-hour and low-hour workers if they have worked a certain number of hours and/or with sufficient regularity over a defined reference period (which may be 12 weeks). There will also be a duty to provide reasonable notice of shifts, and to cancel or change shifts, and an entitlement to compensation for cancelled shifts.

Many manufacturers make use of agency workers, who these protections will extend to, with the responsibility for offering the guaranteed hours falling on the end-hirer as opposed to the agency.

How can we prepare? Whilst much of the detail is yet to be set out in regulations, there are some steps that employers can start to take to prepare for these changes. Manufacturers are encouraged to audit their current use of low and zero-hour workers or agency workers, and ensure processes are in place to track hours worked and to manage shift allocations and cancellations. It would also be sensible to review contracts in place with agencies given that temp-to-perm fees can often be costly (and will be incurred in the event an agency worker accepts a guaranteed hours offer). Employers may also want to review where the use of fixed-term contracts may be appropriate.

Sexual harassment and third-party harassment

Employers currently have a duty to take “reasonable steps” to prevent sexual harassment of their employees. From 30 October 2026, this duty will be increased to require employers to take “all reasonable steps” – although regulations setting out what will amount to reasonable steps isn’t expected until 2027, after the changes have come into effect.

The ERA also introduces a new obligation on employers, from 30 October 2026, to protect employees from all third-party harassment. Given the high level of interaction between employees and third parties at many manufacturing sites, including suppliers and contractors, such environments can be considered high-risk.

How can we prepare? Conduct risk assessments to identify areas within the business where there is a risk of harassment (e.g. if you send field-based sales employees to external events or third-party premises; or where the make-up of the workforce means there is a lack of diversity), reviewing and updating anti-harassment policies, and embedding anti-harassment provisions into commercial terms and arrangements with third parties. Clear signage which sets out that harassment will not be tolerated, and how concerns can be reported, may also be considered a reasonable step for such employers to take.

Trade unions

The ERA has introduced a notable amount of pro-union reforms, intended to make trade union recognition, organisation and industrial action easier. Two key changes anticipated from 30 October 2026 are: (i) the duty to inform workers of their right to join a trade union; and (ii) the new statutory right of access for trade unions to engage with workers (in person or digitally) for the purposes of representation, support, recruitment, organisation and facilitating collective bargaining. These changes could have the effect of greater union visibility in the workplace, and potentially greater membership and recognition requests.

Manufacturing remains an industry ripe for trade union involvement, particularly at single sites with large workforces with common interests, where recruitment and communication can be easier for unions to facilitate.

How can we prepare? The incoming changes will affect those with and without recognised unions, and employers should have a plan in place should a request for access be made, particularly as they are expected to have just 15 working days to respond to a request. It may be advisable to have a draft access agreement in place so that you can act quickly and suggest appropriate parameters, which may lower the risk of formal statutory procedures needing to be used. Where you already have a recognised union in place, consider the terms of the recognition agreement and whether they should be updated to reflect the reality of the current relationship/whether efforts need to be made to have more regular dialogue with the union(s).

Right to work

At the moment, employers are only liable for illegal working penalties in respect of their direct employees. From 1 October 2026, this will be extended to include workers, individual contractors, individual sub-contractors, substitutes and online matching services (but will not go so far as to include genuinely self-employed individuals who are providing their services directly to the public).

Many UK manufacturers will engage agency workers and contractors and therefore will be affected by these changes. To avoid civil penalties, businesses will need to demonstrate compliance with ‘prescribed requirements’ in three key areas:

• Contractual controls: ensuring written arrangements are in place to require those further down the labour supply chain to carry out right to work checks;
• Substitute worker controls: where substitution is permitted, businesses must ensure that substitutes are checked before work starts, and have systems in place to verify the individual’s identity; and
• Identity verification: the business must operate proportionate processes to ensure the individual carrying out the work is the same person whose right to work was verified.

How can we prepare? Employers wanting to prepare for these changes are encouraged to map their workforce, identifying areas of risk, and considering what systems they need to verify individuals’ identities.

A tracker of all ERA changes can be found here. If you have any questions, or require any support, please contact our Employment and Immigration team.