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End of employment in UK

Each country has different rules and regulations that define what happens when an employment relationship comes to an end. And employers in the UK need to be aware of the proper end-of-employment procedures to follow if they want to protect both their business interests and the rights of their employees. We’ll take you through everything you need to know in this guide.

Notice period in the UK

Employees in the UK usually have to give notice to their employer when they resign. This means that they keep working for a certain period of time to give the employer time to replace them. Employers that want to dismiss (fire) an employee usually have to pay them the amount they would have earned if they worked their notice period. This is called ‘payment in lieu of notice.’ 

An employee’s notice period should be set out in their written statement of employment particulars, which is a document they receive on their first day of employment. If employees haven’t been given a written statement (or it doesn’t mention notice periods), they must give at least one week’s notice if they haves been employed for between one month and two years, and one week’s notice for each year of service above 2 years up to a limit of 12 weeks’ notice. 

Employees may not need to give their full notice if there has been a serious breach of contract — for example, if the employer has not provided a safe working environment. 

Do employees need to give written notice?

Whether or not an employee has to give notice in writing depends on their employment contract. If it doesn’t say anything, they can simply tell their employer that they are resigning. However, it’s good practice to give notice with a letter or email so that there is a record of their resignation. 

Employers must provide a written statement if they want to dismiss an employee who is on Statutory Maternity Leave. Other employees can also request a written statement explaining the reasons for dismissal, as long as they have worked for the employer for at least two years. 

Average notice period in the UK

The statutory minimum notice period in the UK is one week. However, employers can choose to stipulate a different notice period in their employees’ contract or written statement of particulars. Different companies have different rules, but a notice period of one month is common in the UK. Employees in senior positions may have longer notice periods. 

Giving notice during probation periods in the UK

An employee’s contract or written statement of employment particulars may provide specific rules about giving notice during a probation period. Generally, employees don’t have to give any notice if they have been employed for less than one month and want to resign. Employers may also be able to dismiss employees without notice during their first month of employment. However, they usually need to give them at least one week’s notice (or payment in lieu of notice) if they dismiss them after this point. 

Dismissal without notice

In some circumstances, employers can dismiss employees without notice. This is usually only permissible in the case of ‘gross misconduct,’ which is when the employee has done something very serious. Examples might include physical violence, theft, or damage to company property. Employers must follow a fair procedure to dismiss employees for gross misconduct. 

In these circumstances, employees usually: 

  • Leave immediately
  • Don’t have a notice period
  • Don’t get payment in lieu of notice 

However, employers still have to pay the employees for:

  • Work they haven’t been paid for yet
  • Accrued holiday hours
  • Any expenses they’re owed 

Gardener’s leave

Gardener’s leave (or gardening leave) is when an employer asks an employee not to work for all or part of their notice period. Usually, this is because the employer doesn’t want the employee accessing sensitive information during this period. Employees on gardener’s leave receive their normal pay and benefits because their employment contract is still in place. 

Severance pay

Unlike in some other countries, employees are usually not required to pay severance pay when they dismiss an employee. In the case of redundancy, where there are strict rules for how much an employer must pay to the people they are making redundant.

Termination of contract UK

In the UK, an employment contract is terminated when an employee resigns, is dismissed or is made redundant. There are specific rules that employers need to follow in all of these cases. If these guidelines are not followed correctly, employees can take their former employers to an employment tribunal with a case of unfair dismissal. 

Terminating an employee’s contract

Terminating or ending an employee’s contract usually means firing or sacking them. Employers in the UK have to use a fair and reasonable procedure to decide whether to dismiss someone. The Advisory, Conciliation and Arbitration Service (Acas) has a Code of Practice on disciplinary and grievance procedures, which employers usually have to follow. If an employee who has been dismissed makes a claim for unfair dismissal, whether or not the employee followed the Code of Practice will be taken into account by the employment tribunal. 

Sending a contract termination notice

Legally, employers only have to provide a written notice of termination if they are dismissing an employee who is on Statutory Maternity Leave. However, other employees can also request a written statement when they are dismissed, and employers have to provide it if they have at least two years of service. 

It’s also good practice to provide a written notice or letter to all employees when they are dismissed, as this creates a record of the dismissal and the reasons behind it. Your written statement or letter should include: 

  • The reason the employee has been dismissed
  • The date their employment contract will end
  • Their notice period (if they have one)
  • Their right to appeal the decision 

Using a termination letter template could help you to make sure you include all of the relevant formalities and information. 

Rules about unfair dismissal

The main employment law concerning the termination of contracts in the UK is the Employment Rights Act 1996. This piece of legislation sets out the potential reasons that an employer could fairly dismiss an employee. They are: 

  • Conduct: When the employee’s behaviour is inappropriate or unacceptable.
  • Capability: When the employee is not able to perform their job.
  • Redundancy: When the employee’s job is no longer needed.
  • A legal reason: When the employee can’t do their job because of a legal reason, such as a delivery driver losing their licence because of a driving offence.
  • ‘Some other substantial reason’: Any other reason that an employment tribunal would consider valid. This might include a fixed-term contract ending, or an employee refusing to agree to new employment terms. 

There are some things which are never acceptable reasons to dismiss an employee, and which are automatically considered as unfair dismissals. For example, you can’t terminate an employment contract because:

  • The employee has made a flexible working request
  • The employee is pregnant or on maternity leave
  • The employee is a trade union member or representative
  • The employee wants to take family leave (e.g. paternity leave)
  • The employee is involved in whistleblowing
  • The employee has taken time off for jury service 

Redundancy and severance pay 

When someone is made redundant, that means their role is no longer needed. There are specific rules and a specific process that employers in the UK have to follow to make an employee redundant. Specifically, employees have the right to: 

  • A notice period
  • Consultation with the employer
  • The option to move into a different job
  • Time off to find a new job 

Employers also have to pay statutory redundancy pay to employees who have worked for them for two years or more. The amount an employer has to pay depends on the employee’s age and length of service. They are entitled to: 

  • Half a week’s pay for each full year they worked under the age of 22
  • One week’s pay for each full year they worked between the ages of 22 and 41
  • A week and a half’s pay for each full year they worked aged 41 and over 

Dismissal because of a long-term illness

In some circumstances, employers can dismiss an employee if they are unable to work because of a long-term illness. However, employment law is clear that termination of the employee’s contract should be a last resort. The employer should first try to make ‘reasonable adjustments’ that would allow the employee to come back to work.

Post-termination restrictions UK

Post-termination restrictions are restrictions that employees can put on a former employee’s actions after they leave their job. These are legal in the UK under certain circumstances. However, they need to be reasonable in scope, duration, and geographical area. The idea is to protect the employer’s business interests, but they should not restrict an employee’s ability to find a new job. 

In the UK, post-termination restrictions should be included in an employee’s contract. The employee must agree to them voluntarily, and they should be brought to the employee’s attention when they sign the contract. Post-termination restrictions are sometimes called post-termination restraints or post-termination restrictive covenants. 

Non-compete restrictions

Non-compete restrictions prevent former employees from working for or setting up a competing business for a certain amount of time, usually within a certain geographical area. Generally speaking, these are the hardest post-termination restrictions to enforce in the UK, because they can severely limit a former employee’s ability to make a living. 

Non-solicitation restrictions

Non-solicitation restrictions prevent employees from being able to ‘poach’ certain clients, customers, or employees away from their old employer. Again, these restrictions are usually only valid for a certain period of time after an employee leaves the company. 

Non-dealing restrictions

Non-dealing restrictions prevent employees from having business dealings with certain clients, customers, or employees of their former business. For example, they may not be able to enter into a contract with any of these people. 

Are post-termination restrictions enforceable in the UK?

For post-termination restrictions to be enforceable, employers have to be able to show two things:

  1.  That they aim to protect the employer’s legitimate business interests
  2. That they go no further than necessary to protect those interests 

For example, an employer could put in place post-termination restrictions that protect its connections with key customers, or to protect trade secrets and confidential information that employees had access to in their former position. 

Post-termination restrictions are also more likely to be enforceable if they are as specific as possible. For example, they should not apply to all employees regardless of their role, but should be specific to the roles held by certain employees. They should also usually be limited in time and geographic scope. If an employer wants to restrict their former employees from soliciting other employees of the business, this should be limited to key senior employees with whom the employee had dealings during their time at the company. 

Enforcing post-termination restraints in the UK

If a former employee breaks a post-termination restraint, employers have a few options for enforcing it. First, they can go to court to ask for an injunction preventing the employee from breaching the restraint. However, this can be an expensive procedure, so it’s usually only worth it if the breach would cause significant damage to the business. Employers may also be able to claim damages if they can show that the employee’s actions had a significant impact on their business and resulted in a financial loss. However, calculating a precise figure in these cases can be challenging.

Waiver contract law UK

If an employee has a claim they could bring to an employment tribunal, UK employers can try to resolve the issue with a settlement agreement. This typically means that the employer pays the employee a fixed sum in exchange for them waiving their right to bring a claim. 

Understanding settlement agreements

Settlement agreements (formerly known as compromise agreements) are formal documents that set out the terms and conditions agreed between the employer and the employee. They’re usually reached through a process of discussion and negotiation, which may involve several offers and counteroffers. If an agreement is not reached, the employee can bring their claim to an employment tribunal. In this case, negotiations about settlement agreements are usually not admissible as evidence. 

Waiving statutory rights

In the UK, employees have certain statutory employment rights, like the right not to be discriminated against or to be unfairly dismissed. These rights are fundamental to UK employment law, so employees can only waive them in specific circumstances. 

For an employee to waive their statutory rights, a settlement agreement must be reached via the Advisory, Conciliation and Arbitration Service (Acas). The agreement has to comply with the requirements set out in the Employment Rights Act 1996. 

Other considerations when offering settlement agreements

Settlement agreements between employers and employees usually involve the employer giving the employee a one-time payment. The amount they receive normally comes down to negotiation between the two parties, during which they might consider: 

  • How long the employee has been employed
  • How difficult it will be to fill their post
  • How long it will take them to find a new job
  • The reasons for the settlement agreement
  • How long it would take to resolve the problem without a settlement agreement
  • The costs involved with dealing with a tribunal if a settlement is not reached 

Settlement agreements also often include an agreement that the employer will provide a reference to the employee to help them find a new job. In this case, the employer and employee need to agree on the acceptable form and content of the reference.

Transfer of undertakings regulations UK

When a business is bought or transferred in the UK, employees are protected under the Transfer of Undertakings (Protection of Employment) regulations (TUPE). These regulations state that employees of the old business should be transferred to the new business and that their terms and conditions of employment transfer with them. The employee’s continuity of employment is also maintained, which means that they retain any additional benefits associated with long tenure. 

Consulting and informing employee representatives

The regulations about transfers of undertaking in the UK require employers to consult with employee representatives or trade union representatives before a transfer happens. They have to tell these representatives: 

  • That the transfer is happening
  • When and why it is happening
  • How it will affect employees
  • About any plans for reorganisation 

Employers who don’t consult with employee representatives can be penalised under the TUPE regulations. 

Transferring employment contracts

Under the TUPE regulations, the new employer has to take over employees’ employment contracts. They usually have to maintain the same terms and conditions of employment, and any collective agreements should still apply after the transfer. If the previous employer has failed to give employees their full statutory rights, the new employer also takes on responsibility for this. That means that employees could make a claim against their employer for unfair treatment, even if it occurred before the transfer. 

What if an employee refuses to work for the new employer?

Employees can refuse to work for the new employer in a transfer of undertakings situation. Legally speaking, this is the same as resigning from their post. However, they usually don’t need to work a notice period and can simply tell their employer (or the new employer) before the transfer. Their employment will then be terminated on the date of the transfer. Employees in this situation usually can’t claim unfair dismissal, and they are not entitled to redundancy pay. 

Changing employees’ terms and conditions after a transfer

There are strict limitations on making changes to an employee’s contract following a transfer of undertakings. Employers generally can’t change employees’ terms and conditions simply to make them the same as the new employer’s, even if the employee agrees.

However, the new employer might be able to change employees’ terms and conditions after the transfer, as long as the transfer itself is not the reason for the change. For example, the new employer could change the terms and conditions that apply to a particular employee if they were moved from a managerial position to a non-managerial one. 

Employers can also change employees’ terms and conditions to make them more favourable, as long as the employees agree. For example, the new employee could give employees an increased holiday allowance that’s in line with the allowance they provide to their existing employees. 

Transfer of undertakings for insolvent businesses

If a business is taken over or bought by another business because it is insolvent, different rules apply to the transfer of employees. For example, the new employer must pay employees any amount that the old employer owed them, for example for unpaid wages or expenses. 

The new employer is also allowed to make changes to employees’ terms and conditions (including reducing their pay) if this is done to prevent job losses. These changes need to be agreed with employee representatives or trade union representatives. 

Redundancy rights for transferred employees

There are also rules that apply to redundancies in a transfer of undertakings situation. Specifically, the new employer can’t make employees redundant simply because they have been transferred from another employer. However, they may be able to make redundancies for an ‘economic, organisational or technical’ reason because of changes to the workforce. In this case, employees are usually entitled to statutory redundancy pay.

Avoid risk and missed opportunities with our end-to-end employment solutions

There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in the UK — or you could end up facing legal issues. 

Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible .

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