Even if you have a valid reason for terminating an employee’s employment contract, you must follow a fair and lawful dismissal procedure. This includes giving an employee any legal notice period or pay-in-lieu-of-notice that they are entitled to.
The dismissal process can be complicated legally, requiring careful handling and a thorough understanding of the law.
Before making any dismissal decision, it’s critical to understand your employees’ rights and entitlements to any period of notice or notice pay, as well as how to lawfully terminate their employment contract.
Failure to meet the minimum statutory notice periods can result in costly tribunal claims brought by the former employee.
How long are Statutory Notice Periods?
Under the Employment Rights Act (ERA) 1996, most employees are entitled to a certain amount of notice before their contract of employment can be ended. The length of notice will depend on the employee’s length of service.
By law, you have to give the following notice as a minimum:
- Employed for less than one month – no entitlement to statutory notice period.
- Employed for one month to two years – minimum one week’s notice.
- Employed for two to twelve years – minimum two weeks notice, plus an extra week for each additional year of continuous employment, up to a maximum of twelve weeks.
- Employed for 12 years or more – minimum 12 weeks’ notice.
For example, employees with six years of continuous service are entitled to a minimum of six weeks of statutory notice, while those with 13 years are entitled to 13 weeks.
Statutory notice periods apply regardless of the grounds for dismissal, with the exception of summary dismissals in cases of gross misconduct.
Enhanced notice periods
Employers can provide employees with additional, enhanced notice periods under the terms of the employment contract. Contractual notice periods cannot be any less than the employee’s equivalent statutory entitlement.
It is also common for employers to include a Pay In Lieu of Notice (PILON) clause within the contract. A PILON clause means that instead of allowing the employee to work their notice, the employer can pay them.
PILON clauses are useful for employers in cases where it would be a risk to allow the employee to work their notice, such as where the employment relationship has seriously deteriorated, or if the employer wants to prevent the employee from accessing sensitive or confidential information that they could use in a new job.
If the contract includes a PILON clause, the employer has the option of paying the employee for the relevant notice period, allowing them to terminate the employment on an agreed date.
Varying notice periods
The statutory notice periods cannot be varied or changed. If the contract specifies a shorter notice period than the employee would be entitled to by law, the statutory period would take precedence over the contractual provisions; the contract would be treated as if it included the statutory period and the ERA statutory minimum would apply.
As with any contractual term, contractual notice periods can be changed provided they do not fall below the statutory minimum and that both parties willingly agree to the new terms.
The employer should not try to change the terms of an employee’s employment contract without their consent, as any attempt to unilaterally vary any contractual term regarding notice is likely to be unenforceable.
Employee rights during the notice period
During the notice period, employees continue to benefit from certain rights.
If an employee is required to work during their notice period, they should continue to be paid their regular wages and continue to accrue their statutory holiday entitlement during that time. The terms of the contract will determine whether or not they are entitled to additional, enhanced holiday leave.
If you choose to make a payment in lieu of notice, it has to be based on the employee’s normal rate of pay, including any contractual benefits. You can offer a PILON payment to an employee even if their contract does not allow it, but you cannot force them to accept it. You must pay them full pay and any other contractual benefits for the duration of their notice period if they agree.
The employee will usually be entitled to work their notice period if there is no contractual PILON provision unless there is a garden leave clause.
Garden leave is when an employer tells an employee that they will not be required to work for all or part of their notice period, even though they will be paid during that time. Any provision for garden leave will not end the notice period early, putting the employee on paid leave during their notice period but not requiring them to report to work.
Breach of contract claims
You will be in breach of contract as an employer if you fail to give the employee the proper notice when terminating their employment. This means that if you fail to provide an employee with the proper notice period or pay, you could face a wrongful dismissal claim.
A wrongful dismissal claim, in the context of notice provisions, refers to the termination of a contract of employment in a way that breaches either the implied term of providing the statutory minimum notice period or any express contractual term of notice or pay in lieu.
If a breach of contract is established, the employee has the right to seek damages as compensation for the breach.
If an employee is denied the right to work their notice and the contract does not provide for pay in lieu, a claim for wrongful dismissal may arise. In the absence of a contractual PILON provision, making such a payment may not be enough to satisfy the employee’s damages claim.
To succeed in a wrongful dismissal claim, an employee must show not only a breach of contract, but also that they suffered a loss as a result of the breach. If the employee is placed in the same financial situation as if they had worked their notice, it’s unlikely that a claim for damages will be filed.
The amount of damages awarded in a successful wrongful dismissal claim is typically equal to the value of the employee’s pay and any benefits received during the period of notice that the employee would have received had the employment contract been lawfully terminated.
In most cases, wrongful dismissal damages will be limited to the amount of time an employee should have been allowed to work their notice or be paid notice pay. Nonetheless, this can result in a significant compensatory award for high earners or any employee entitled to a lengthy contractual notice period.
For this type of claim, the maximum amount of damages that can be awarded in an employment tribunal is £25,000. An employee can, however, file a breach of contract claim in court, where damages are not limited.
Employee refusing to work their notice
If you ask an employee to work out any notice period and they refuse, the employee will be in breach of contract, which could result in damages in your favour if their refusal causes financial loss to your company.
When an employee resigns with immediate effect, the same principles apply.
If an employee has been with you for more than a month, they must give you at least a week’s notice.
What happens if an employee does not show up for work during their notice period?
Once notified of the decision to dismiss, the employee may prefer not to work their notice period. Employers are free to agree with the employee to waive the notice period if the employee asks to leave sooner.
You are not usually obligated to give them any notice pay in these situations, though you can agree to do so.
An employee can also agree to waive their right to notice or pay for notice.
Dismissal without notice
The only exception to the notice rules is if an employee has engaged in gross misconduct for which they can be summarily dismissed, i.e. fired without pay or without notice. Violence or threats of violence, theft or fraud from the employer, misuse of company property, or serious insubordination are all examples of gross misconduct.
Dismissing an employee without notice or pay will not be deemed unlawful if there is clear evidence to support a finding of gross misconduct. This will only be the case if the alleged act is so serious that it constitutes a fundamental breach of the employment contract, in which case the contract is no longer in effect and no notice is required to terminate it. This also means that before dismissing someone, you must conduct a thorough investigation into any allegations and follow a fair disciplinary procedure.
If an employer makes a mistake and dismisses an employee for gross misconduct, the employee can still file a claim for wrongful dismissal to recover any money they would have received if they had been given proper notice.
DavidsonMorris’ employment law specialists work with employers to provide guidance across aspects of workforce management and dispute resolution, including advice on dismissals and exits. Contact us for specific advice.
Statutory Notice Period FAQs
What is the statutory notice period during probation?
The length of notice when dismissing a new-starter depends on the terms of their contract. In any event, if the employee has at least one month’s service, they will be entitled to a statutory minimum of one weeks’ notice.
What is the legal notice period for leaving a job?
When resigning, you must give at least a week’s notice if you’ve been in your job for more than a month, although your contract of employment may require you to give more.
Is 3 months notice enforceable?
If an employee is dismissed or resigns, where their employment contract requires a 3 month notice period, any failure to honour this period can be enforced as a breach of contract through a tribunal or the courts.
How much notice do I have to give an employee?
The length of notice that an employer should give an employee will depend on what is stated in their employment contract. The statutory minimum is one week if they have worked for you continuously for a period of one month.
Last updated: 23 September 2023