Fire and rehire

Fire and rehire: the new tribunal compensation cap from 6 October 2026

Updated 6 October 2026

From 6 October 2026, two things matter at once in a fire and rehire case. First, the statutory code on fire and rehire is in force, and tribunals must consider whether an employer followed it when they decided to dismiss and re-engage on worse terms. Second, a new compensation ceiling applies to claims brought under the relevant provisions, lifting the upper limit on what a tribunal can award you if you win. Together, these two pieces tighten the practical consequences of getting fire and rehire wrong. Your concrete rights from 6 October 2026 are: a clearer duty on your employer to consult, to explore alternatives, and to warn you in writing before any dismissal; a higher financial cap on the compensatory award a tribunal can make in a successful claim; and the ability for the tribunal to treat a failure to follow the code as a reason to increase any award by up to 25 percent, or to reduce it where the employee unreasonably refused an offer.

What is the new fire and rehire compensation cap from 6 October 2026

From 6 October 2026, the maximum compensatory award an employment tribunal can make in a successful fire and rehire claim rises. The previous statutory ceiling, which is shared with ordinary unfair dismissal claims, is supplemented for these specific claims by an additional uplift that reflects the seriousness of using dismissal as a bargaining tool. The precise mechanics sit in regulations made under the Employment Rights Act 1996 and in the secondary legislation that commenced on 6 October 2026.

For most employees, this means that even if you have been with your employer for many years and the basic compensatory award would already be substantial, a fire and rehire finding can push the total higher. The award is still subject to the statutory maximum for unfair dismissal in the round, but the way that maximum is calculated for fire and rehire cases changes, and the tribunal is given more room to apply it.

The point of the change is deterrence. The government has been clear that it considers fire and rehire to be an acceptable last resort only, and the financial consequences of getting it wrong are now sharper. If your employer has already dismissed and re-engaged you on worse terms, or has threatened to, this is the rule that will apply to any claim you bring after 6 October 2026.

How does this interact with the fire and rehire statutory code

The statutory code on fire and rehire took effect earlier in 2026 and remains the central reference point for any reasonable employer. It sets out what a fair process looks like: meaningful consultation, genuine exploration of alternatives, and proper warning before any dismissal. From 6 October 2026, the consequences of ignoring the code become more visible in the compensation that follows.

If you bring a claim and the tribunal finds that your employer failed to follow the code, the tribunal can increase any award by up to 25 percent. If you unreasonably refused a reasonable offer from your employer, the tribunal can reduce any award by up to 25 percent. These adjustments are on top of the new higher cap, and they apply to claims issued on or after 6 October 2026.

In practice this means that the worst-case scenario for an employer who ignores the code has just become more expensive, and the best-case scenario for an employee who has been mistreated has become more rewarding. The code, the cap, and the uplift work together rather than as alternatives. You do not have to choose which one to rely on.

Who is covered by the new fire and rehire compensation cap

The new cap applies to employees who are dismissed and offered re-engagement on reduced terms, and to employees who resign in response to a fire and rehire ultimatum and bring a constructive unfair dismissal claim. It does not apply to genuinely voluntary variations of contract, where the employer has not threatened dismissal. Nor does it apply to collective redundancies where the proper consultation process has been followed, although the two regimes can overlap in larger restructurings.

You should also note that the new cap sits alongside the existing protective award route, which can apply where fire and rehire is used in connection with a wider dismissal programme of 20 or more employees. In those cases, you can pursue both a protective award and a fire and rehire claim, although the tribunal will not allow double recovery for the same loss. The protective award is calculated as up to 90 days of gross pay, and the new cap lifts the ceiling on the compensatory element of the unfair dismissal claim that runs alongside it.

For most readers, the simplest way to think about coverage is this: if your employer has said, in substance, accept these new terms or you are out, and that threat has shaped what happened to you, the new cap is in play from 6 October 2026 onwards. The label on the employer's paperwork does not control the analysis.

What to do in the meantime

If you are facing a fire and rehire ultimatum now, take these steps in order. First, ask for everything in writing. A verbal threat of dismissal is real, but it is hard to evidence later. Second, ask your employer to confirm which alternatives to dismissal have been considered, and to set out the business case for the change. The statutory code requires this. Third, raise a grievance if the process is being rushed or if the consultation is not genuine, and keep a copy of the grievance and the response.

Fourth, contact your trade union if you are a member, or consider joining one, since the right to join a trade union is in force from 30 October 2026 and a recognised union can trigger collective consultation rights in larger workplaces. Fifth, gather your evidence: emails, meeting notes, the new contract, the old contract, any pay comparison, and any witness names. Sixth, note the time limit for bringing an unfair dismissal claim, which is normally three months from the effective date of dismissal, and treat any settlement agreement offer with care, since the new rules on settlement agreements apply from 1 July 2026 and an adviser funded by your employer cannot advise you on the merits of the claim.

If you have already accepted new terms under pressure and want to challenge what happened, you may still be able to bring a claim, particularly if you can show that you resigned in response to a repudiatory breach or that the dismissal and re-engagement process was itself unfair. The time limit is short, and the new cap only applies to claims issued on or after 6 October 2026, so the practical question is usually whether the claim can be issued in time rather than which regime applies.

This article is general information for employees in the United Kingdom and is not legal advice. Tribunal time limits are short and the facts of individual cases vary, so consider regulated advice if you are facing a fire and rehire ultimatum or thinking of bringing a claim.