Dismissing employees is part and parcel of running and managing a business. It can also expose employers to considerable legal risk. Not only does the reason for dismissal have to be lawful – such as conduct, performance or due to redundancies – the employee continues to have certain rights and protections throughout the dismissal process which the employer has to comply with, or risk complaints and tribunal action.
Even if you have a valid reason for bringing an individual’s contract of employment to an end, you must follow a fair and lawful dismissal procedure. This includes providing an employee with any notice period, or pay in lieu of notice, to which they are legally entitled.
The following guide for employers looks at the minimum statutory notice periods as required by law when dismissing an employee, together with the contractual notice period rules, and the risk of getting these wrong.
What are statutory notice periods?
The Employment Rights Act (ERA) 1996 provides a minimum amount of notice that an employer has to give to terminate a contract of employment. These are set by the length of an employee’s service. When dismissing an employee, as an absolute minimum, you will usually be required to provide the following statutory notice:
- If employed between 1 month to 2 years: 1 week’s notice
- If employed between 2 to 12 years: 1 week’s notice for each year
- If employed for 12 or more years: 12 weeks’ notice.
If an employee has been in your employment for less than a month, they will not be entitled to any statutory notice period. However, provided they have worked for you continuously for at least one month, they will be entitled to a minimum of one week.
For an employee that has been in your employment for at least two years, you will be required to provide them with a period of two weeks notice, plus an extra week for each addtional year of continuous employment, up to a maximum of twelve weeks. For example, an employee with five years’ continuous service is entitled to five weeks statutory notice, whilst an employee with fifteen years’ service is entitled to twelve weeks statutory notice.
These notice periods will apply regardless of the reason for the dismissal, the only exception being where an employee is summarily dismissed by reason of gross misconduct.
Contractual notice period rules
Statutory notice is the legal minimum that an employee can be given on dismissal, whereas contractual notice is the amount expressly set out in the contract of employment. If the notice period under the contract is different to the statutory minimum, the employee will be entitled to whichever is longer.
In many cases, the employment contract will also provide for pay in lieu of notice (PILON). This means the employer can provide notice pay, rather than allowing the employee to work their notice. Where the contract contains a PILON clause, the employer can choose to pay the notice period and, effectively, end the employment from an agreed date.
An employer may choose to utilise a PILON clause in circumstances where keeping the employee at work during their notice period has the potential to cause damage to the business. This could be, for example, where working relationships with the employee have seriously broken down or where the employer wants to prevent the employee from having access to sensitive or confidential information that they could use in a new job.
Can notice periods be changed?
The minimum notice periods as required by law cannot be changed. This means that even if the contract of employment makes provision for a shorter notice period, the employee will still be entitled to the statutory minimum under the ERA. As an employer, you may give an employee more than the statutory minimum under the terms of their contract, but you cannot give them less. Here, the minimum period would automatically override any contractual provisions and the contract would be treated as if it contained the statutory period.
In contrast, it is possible for any contractual notice period to be changed, provided this does not fall short of the statutory minimum and subject to agreement by both parties. However, an employer should not seek to change the terms of an employee’s contract of employment without their consent, where any attempt to unilaterally vary any contractual term as to notice is unlikely to be unenforceable.
Employee rights during their notice period
If an employee is required to work their notice period, they will be entitled to payment of their wages as normal and will continue to accrue their statutory holidays throughout that period. Any entitlement to enhanced holiday leave will depend on the terms of their contract.
If you opt instead to make a payment in lieu, where permitted, this should still be based on the employee’s normal rate of pay, including any contractual entitlements. You can offer a PILON payment, even if their contract does not provide for this, but you cannot force an employee to agree to it. If they do agree, you must give them full pay and any other contractual benefits for the duration of their notice period.
If there is no contractual PILON provision, the employee will usually be entitled to serve their notice period, unless there is a clause allowing for garden leave. This is when an employer tells an employee not to work for all or some of their notice period, although they will still be employed throughout this period. Any provision for garden leave will not end the notice period early, where this will put the employee on paid leave during their notice, but they will not be required to attend work.
What are the risks of getting notice periods wrong?
As an employer, if you fail to give the employee the correct notice when terminating their employment, you will be classed as in breach of contract. This means if you fail to provide an employee with the correct notice period or notice pay, you risk being exposed to a claim for wrongful dismissal.
In the context of notice provisions, a wrongful dismissal claim refers to the termination of a contract of employment in a way that breaches either the implied term to provide the statutory minimum notice period or any express contractual term as to notice or pay in lieu. If a breach of contract can be proven, this will then give rise to the right of the employee to seek damages to reflect this breach.
A claim for wrongful dismissal can also arise if an employee is denied any right to work their notice where the contract does not make provision for pay in lieu. In the absence of any contractual PILON provision, the making of such a payment may not necessarily extinguish the employee’s claim for damages. That said, to succeed in a claim for wrongful dismissal, an employee must not only prove a breach of contract, but that they suffered a loss because of that breach. If the employee is put in the same financial position as they would have been in had they worked their notice, it’s unlikely any claim will sound in damages.
Legal remedies
The amount of damages awarded for a successful wrongful dismissal claim will usually equate to the value of the employee’s pay and any benefits during the period of notice that the employee would have received had the contract of employment been lawfully terminated.
In most cases, any damages for wrongful dismissal will be relatively low, limited to the period of time that an employee should’ve been allowed to work their notice or given notice pay. Still, for high earners or any employee entitled to a lengthy contractual notice period, this can result in a significant compensatory award.
The amount of damages that can be awarded in the employment tribunal for this type of claim is limited to £25,000. However, an employee can also pursue a claim for breach of contract through the courts, where damages are uncapped.
What if an employee does not work their notice period?
An employee may prefer not to work their notice period after being notified of any decision to dismiss. If the employee asks if they can leave before their notice period ends, for example, if they have another job to go to, you can agree to waive this period. In these circumstances, you will not usually be obligated to give them any notice pay, although you can agree to do so. Equally, an employee can agree to waive their right to notice or notice pay.
If, however, you ask an employee to work out any notice period and they refuse, the employee will be in breach of contract that could potentially sound in damages in your favour, assuming their refusal has resulted in financial loss to your business. Equally, the same principles apply where an employee resigns with immediate effect. An employee must provide you with at least a week’s notice if they have been in their job for more than a month.
What are the ‘without notice’ rules?
The only exception to the notice rules is where an employee has committed an act of gross misconduct for which they can be summarily dismissed, ie; dismissed without pay or pay in lieu of notice. Common examples of gross misconduct include violence or threats of violence, theft or fraud from the employer, misuse of company property or serious insubordination.
Where there is clear evidence to support a finding of gross misconduct, dismissing an employee without notice or notice pay will not be deemed unlawful. However, this will only be the case where the act alleged is so serious that it amounts to a fundamental breach of the contract of employment, such that the contract is no longer in existence and no notice is required to end it. This also means that you must first undertake a full investigation of any allegations, and follow a fair disciplinary process, before making any decision to dismiss.
If the employer wrongly decides an act amounts to gross misconduct and summarily dismisses the employee on that basis, the employee can still make a claim for wrongful dismissal to receive any money that they would have received with proper notice.
How to avoid tribunal claims
The dismissal process can be fraught with legal difficulty, where careful handling and a clear understanding of the law will be required. It’s therefore important to understand the rights and entitlements of your employees to any period of notice or notice pay, and how to lawfully bring their contract of employment to an end, before making any decision to dismiss.
The rules can be especially complex when it comes to notice periods where an employee is already absent from work, for example, on holiday, on sick or maternity leave, or on furlough, Ideally, legal advice should always be sought here.
By seeking expert legal advice from an employment law specialist this can help you to safely navigate any difficult issues arising from dismissals, including the provision of the correct notice period or pay. In this way you can help to streamline the dismissal process and minimise the risk of expensive litigation.
Statutory Notice Period FAQs
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Legal disclaimer
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.
Author
Anne Morris is the founder and Managing Director of DavidsonMorris. A highly experienced lawyer, she is recognised by Chambers & Partners and the Legal 500 UK as a trusted adviser to multinationals, large corporates and SMEs, delivering strategic immigration and global mobility advice. Anne is also an active commentator on UK immigration and HR matters.
