As an employer, terminating employment by dismissal can be an unpleasant, but necessary, part of your role. Dismissal could be for a number of different reasons, from misconduct matters and poor performance issues, to where an employee’s job role has been made redundant. However, even if you have a lawful reason for dismissal, and your decision to dismiss is reasonable in all the circumstances, you must still follow a fair procedure, including providing written notification.
The following article looks at the importance of the termination of employment letter and when these should be used by employers, together with a list of what this letter should contain and a sample of what this letter should look like in practice.
What is a termination of employment letter?
If a decision to dismiss is made by an employer, regardless of the reasons for this, an employee must be formally notified that their employment is being brought to an end. This usually means giving the employee a termination of employment letter. At the very least, this letter should provide the ground(s) for dismissal, along with the date the contract will end and details of the notice period. The employee should also be told of their right to appeal.
As an employer, even where you have a potentially fair reason for dismissal, and your decision is clearly one which falls within a range of reasonable responses, you must still follow a full and fair procedure. This not only includes providing the employee with an opportunity to make representations during the course of any dismissal process — whether this be part of a disciplinary, capability or redundancy consultation procedure etc — but setting out the reasons for your decision to dismiss, and the employee’s rights on dismissal, in writing.
Failing to follow a fair procedure can have significant consequences for you as an employer, not least exposing you to a costly and time-consuming claim for unfair or wrongful dismissal. You must act fairly at all times when ending employment, from having a lawful basis on which to dismiss an employee to setting out your decision in a termination letter. You must also ensure that the employee is given the correct notice period or pay in lieu of notice (PILON).
When should you send a termination of employment letter?
Under the Employment Rights Act (ERA) 1996, there are five potentially fair reasons for dismissal: capability, conduct, redundancy, statutory illegality or for some other substantial reason (SOSR). SOSR is a statutory catch-all provision where no other potentially fair reasons apply, such as a breakdown in the trust and confidence between the employer and employee, or a serious conflict of interest. Provided you have a genuine and valid reason for dismissal as set out under the ERA, and you act reasonably in treating that reason as sufficient for dismissal, you can then send a termination of employment letter.
This letter represents the final stage in any dismissal process, providing the employee with important information about the reason(s) for them losing their job and their right of appeal. It will also inform them of their effective date of termination and whether or not they will be required to work out their notice period. In some cases, where an employee is dismissed for gross misconduct, they can be dismissed without notice or PILON. This is known as summary dismissal. However, you should only summarily dismiss an employee where the misconduct is so serious that it has irreparably damaged the employment relationship and justifies dismissal for a first offence. Examples of gross misconduct include theft, fraud and violence.
Still, even in cases where the basis for dismissal is irrefutable, and the evidence clear, you must not underestimate the importance of putting your decision in writing. This is because, among other things, the letter will let the employee know of their right to appeal this decision and, where applicable, why they have not been given any notice or PILON. In cases of gross misconduct, you must also still follow a full disciplinary procedure, giving the employee the chance to defend the allegations made against them and put forward any mitigation.
Is a termination of employment letter needed for every employee?
For employees with two years’ service, they have the statutory right, on request, to a written statement of the reasons for dismissal within fourteen days of that request being made. They also have the right to claim unfair dismissal, where any failure to provide a termination of employment letter is likely to harm your ability to defend such claim. An employment tribunal is not only likely to find that you failed to follow a fair procedure, but may also draw an adverse inference as to the real reason for your decision to dismiss.
However, the right to a written dismissal statement, and the right to claim unfair dismissal, only arises if an employee has worked for you for a continuous period of two years. This qualifying service requirement means that you can dismiss an employee with less than two years’ service without having to justify your decision or put that decision in writing. Even if you fail to provide the employee with a termination of employment letter, one of the fundamental steps in making a dismissal process fair, this is unlikely to have any legal repercussions for you and your business, at least in respect of ordinary unfair dismissal.
In contrast, regardless of length of service, all employees have the right not to be dismissed for an automatically unfair reason, such as by reason of pregnancy or maternity, or for highlighting or reporting health and safety concerns in the workplace. This is because the right to claim automatic unfair dismissal is a day one right, where the law affords special protection to employees who are dismissed for certain statutory reasons. An employee will also only need to prove that the cause for their dismissal was for one of the reasons prohibited by law, and not that you acted unreasonably or failed to follow a fair procedure.
By providing all employees with clear written reasons for their dismissal within a termination of employment letter, this will help to pre-empt any potential claim for automatically unfair dismissal. While the fact that you have a followed fair procedure will not be relevant in this context, the letter can still be used to provide a paper trail of your decision-making, and document a lawful reason to dismiss. In this way, provided the tribunal is satisfied that the letter is evidence of a genuine and valid reason, an automatic unfair dismissal claim would fail.
What should a termination of employment letter contain?
Having made a decision to dismiss, and followed any relevant dismissal procedure, you will need to provide the employee with a termination of employment letter as soon as possible. This will ensure that the employee has sufficient information about why they have been dismissed, and their rights and responsibilities on termination.
However, the contents of a termination of employment letter will very much depend upon the nature of the dismissal, the reason(s) for this decision and the manner in which the dismissal is to take place, for example, with immediate effect or with notice/PILON. There is also no prescribed format for a termination letter, although it must include:
- The reason(s) for the dismissal: you should carefully set out why you have decided to dismiss the employee, with brief reference to any factual matrix. You must also be able to document one of the five potentially fair reasons for dismissal as set out under the ERA.
- The basis of your decision-making: it can be useful to outline what factors were taken into account in reaching a dismissal decision. This could include, for example, any previous incidents of misconduct and disciplinary warnings given. It could also include any factors that were disregarded, such as any mitigating circumstances, and explaining why any alternative to dismissal was disregarded.
- The dismissal procedure: explaining the process that was followed in reaching your decision to dismiss can help to show the fairness of your overall decision-making. This could include reference to, for example, any disciplinary investigation and hearing for a misconduct matter, or any consultation and selection process in the context of redundancy.
- The employee’s notice period: in most cases, the employee will be entitled to either a statutory or contractual notice period. You must make it clear whether or not the employer is required to work their notice, or if they will be paid in lieu, provided the employment contract contains a suitable PILON provision. In the case of summary dismissal for gross misconduct, termination of employment will take place with immediate effect, although the letter must explain why the employee has been dismissed without notice.
- The effective date of termination: you must set out the date upon which the employee’s contract of employment will come to an end. This is important for both legal and practical reasons, including how long the employee will remain under contract, and the date at which any final salary and holiday pay will be calculated.
- Any other legal and practical matters: there can be all kinds of other legalities and practicalities that need to be clarified on dismissal, such as the arrangements for the return of any company property and when the employee can expect to receive their P45. The termination of employment letter can also be used to remind the employee of any post-termination contractual provisions, such as a restrictive covenant, preventing them from working for a competitor within a certain geographical area for a prescribed period of time.
- The employee’s right to appeal: the employee must be notified of their right to appeal any decision to dismiss. They must also be told what appeals procedure to follow, or where to find this, including how to submit an appeal and the time period for doing so. There is no strict timeframe for allowing an appeal against dismissal, although this will usually be set out in any workplace policy, for example, within 5 working days.
Sample termination of employment letter
The following sample letter provides an outline illustration of what a termination of employment letter could include, in this case, due to persistent lateness. Remember that in practice, the letter should be tailored to the specific circumstances of each dismissal. As the contents of this letter could be scrutinised by a tribunal, legal advice should always be sought in the event of any uncertainty as to what to include.
[Date of the letter]
Dear [name of employee],
Regrettably, we are writing to confirm the decision taken following your disciplinary hearing on the [insert date of hearing] to dismiss you on the grounds of misconduct.
In particular, from the [insert date] to [insert date] you have been late for work on eight separate occasions, and on two of these occasions you have arrived at the office more than one hour late. You have also been warned, once verbally and twice in writing, of the potential disciplinary consequences of this behaviour if an improvement in your time-keeping was not made. Since the last warning, you have been late, without reasonable excuse, a further three times.
Given the fact that you have already received two written warnings on [insert date] and [insert date], and that these warnings have not had the desired effect, a decision has been made to terminate your employment. This dismissal decision is following the most recent disciplinary investigation and hearing in which you were given an opportunity to respond to the allegations of misconduct. Having admitted you have difficulty with time-keeping due to late nights, and in the absence of any mitigating factors, we feel we now have no alternative but to dismiss.
Under your contract of employment, you are entitled to one month’s notice, to be paid in lieu. The effective date of termination is therefore [insert date]. You will not be required to come into the office or to work out this notice period. You are asked to return your company laptop and mobile telephone. You are also asked to abide by the post-termination restraint of trade and confidentiality obligations as set out under your contract, until their expiry.
In accordance with the company’s written disciplinary policy, you have the right to appeal this dismissal decision. If you wish to lodge an appeal, you must do so by setting out your reasons in writing and sending these to [insert name] at [insert address details] by [insert date]. As with the disciplinary hearing, you have a right to be accompanied at any appeal hearing.
Dismissals and terminating employment contracts can be challenging for employers, and if not handled as required by law, you could face repercussions such as claims for unfair dismissal.
DavidsonMorris’ employment lawyers can help with all aspects of employment contracts, including terminations. We bring extensive experience in advising employers on employee exits in all circumstances, from redundancy to performance management, long term sickness absence and more. Working closely with our HR specialists, we offer a holistic advisory and support service for employers encompassing both the legal and people management elements of contract terminations. Speak to our experts today for advice.
Termination of employment letter FAQs
How do I write a letter of termination of employment?
When writing a termination of employment letter, you must identify a fair reason(s) for the dismissal, and set out the effective date of termination, whether the employee is required to work their notice and their right to appeal.
Can I email a letter of termination?
A letter of termination can be hand-written, or typed and printed, before being posted. It can also be sent via email. There is no right or wrong format, although employers are advised to retain a copy for their records.
Last updated: 6 August 2022