Terminating an employee or dismissing staff is when a company officially ends an employee contract. The contract is officially ended in writing, and the essential point to bear in mind is that it must be done fairly. 

Under UK employment law, terminating an employee must be conducted in a fair way that is both reasonable and justifiable, and it can occur in several different ways. The two broad categories for dismissal are voluntary and involuntary termination, and each type has its own set of rules.

For most companies, terminating an employee can be a difficult yet necessary procedure, and as an HR professional or employer, knowing how to terminate an employee fairly and justifiably in accordance with UK laws and regulations is a recommended practice. 

UK labor laws protect both employers and employees. This means employers can dismiss their workers if they are not capable of doing their job and are becoming burdensome to other members of the team. However, an employee cannot be dismissed without reason.

Dismissal, redundancy, resignation and retirement are all forms of termination, and they are determined by whether the employer chooses to end their employee’s contract or whether the employee decides to bring their time at the company to an end. 

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Types of Termination

Dismissal

Fair dismissal, unfair dismissal, constructive dismissal, and wrongful dismissal are the four types of dismissals. We will outline how terminating employment contracts works in the UK for both the employee and employer. 

Fair Dismissal

What distinguishes a fair employee dismissal from an unfair dismissal is the reasoning behind the dismissal and o how the company acts and conducts itself throughout the dismissal process. 

When it comes to terminating an employee, it is imperative that the dismissal is fair and legal. Following the conditions set out in employment contracts and labor codes will help companies avoid the risk of having to rehire or pay dismissed employees compensation if an employment tribunal determines that the dismissal was indeed “unfair” or “wrongful.” It will also signal fair hiring practices to other employees. 

Examples of Valid Reasons for Terminating an Employee

Complaint reasons to terminate an employee can include dismissals for conduct or performance-related reasons such as:

  • Their incapability to carry out responsibilities to the required standard (Though if the capability issue is health-related, all avenues to assist them in doing their job should be exhausted before dismissal)
  • Their unwillingness to do their job properly despite being physically capable
  • A form of misconduct, such as unauthorized absence from work or persistent lateness
  • Something has occurred that prevents them from legally being able to carry out their responsibilities such as losing their driving license

Another example of a fair termination is when a temporary contract is provided for maternity cover and a termination occurs at the end of that period, it would be classed as a fair dismissal given the fact it was clearly communicated in writing that the job would be on a temporary basis. This type of termination and similar instances are referred to as “other substantial reasons” for the termination of an employee.

Determining Fair Employment Termination

As mentioned above, terminating an employee is only fair if it is based on a valid reason and if the company acts in a reasonable way through the dismissal process. There is no legal definition of what is “reasonable”, however, if the company is taken to an employment or industrial tribunal, they would determine fairness based on:

  • Whether they believe the dismissal is genuinely fair
  • Whether the correct procedures are  followed 
  • Whether, where appropriate, proper investigations took place
  • Whether employees were given a clear reason as to why they were being considered for dismissal
  • Whether employees' views were listened to and given a chance to appeal the termination
  • Whether employees were permitted to be accompanied at the disciplinary meeting or termination hearing
  • Whether the employee understood the consequences of their behavior beforehand

If reasonable adjustments such as changing the recruitment process or making physical changes in the workplace cannot be made for an employee that has a disability, it may still be deemed fair for the organization to terminate their employment. 

Further advice and resources on how to terminate an employee can be found on the Advisory, Conciliation and Arbitration Service (ACAS) website as well as the Gov.uk website.

Unfair Dismissal

We’ve walked through how to terminate an employee fairly, but terminating an employee can still be viewed as unfair if a tribunal believes the reason given for dismissal wasn’t rationale, or if the employer acted in an unreasonable manner  or if, indeed, the termination  was unfair. 

Typical Reasons Deemed as Unfair Dismissal

There are several reasons why terminating an employee is automatically deemed unfair, even if an employee has acted reasonably and these reasons include:

  • All reasons relating to maternity
  • Familial reasons including parental leave, birth or adoption leave, paternity leave or time off that’s required for dependants
  • Pay and working hours that comprise of working time regulations, the national minimum wage and annual leave
  • Acting as an employee or trade union representative
  • Compulsory retirement on the grounds of age can be challenged, unless there is an objective way to justify it
  • Employee involvement in lawful industrial action

Reasons where it is not automatically unlawful include:

  • Terminating an employee based on a disability if no reasonable adjustments on the part of the employer have been made
  • Terminating an employee based on their political beliefs, although an investigation by a tribunal may determine it’s unfair

Unfair Dismissal Claims

Employers can face repercussions if an employee is to claim unfair dismissal and a tribunal finds that the process was indeed unfair. In addition to possibly having to reinstate them or re-employ them in a different role, compensation may have to be paid.

The payment of compensation depends  on multiple factors, including the age of the employee, their gross weekly pay, and their length of service in the business. Any statutory illegality can trigger unfair dismissal.

It’s important to note that additional compensation will likely have to be paid if an employer refuses to rehire an employee whose employment contract they terminated.

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Constructive Dismissal

When an employee feels they have no choice or are forced to leave their job against their will because of an employer’s conduct or a serious breach of their contract, they may claim a constructive unfair dismissal. 

Whether it’s the result of one or multiple incidents, the following are examples of constructive dismissal:

  • An employee is being bullied or discriminated against (based on gender, sexuality, race, religion, pregnancy and maternity or disability) to the point of resignation
  • Unreasonable changes in an employee’s work environment or patterns of work without a written agreement
  • An employer’s refusal to look into an employee’s grievance 
  • Inconsistent payments, both in terms of frequency and amount, without a valid reason

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Wrongful Dismissal

Typically linked to the termination of an employee without notice pay or notice period, wrongful dismissal is when an employer breaches an employee’s contract. The minimum statutory notice period in the UK is one week. 

When notice periods or other contractual obligations are not respected by the employee, it is within the employee’s rights to claim wrongful dismissal regardless of the length of employment.

Also known as summary dismissal, tribunals will conclude dismissals are “procedurally unfair” if an employer terminates an employee’s contract without pay. If their contract does not say they can be suspended without pay, employees should only be suspended on full pay while an investigation into their employer’s fairness and conduct throughout the procedure takes place.

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Redundancy

Redundancies are a form of termination of an employee when their role in the company is no longer required. There are several reasons this could happen including machinery or technology removing the need for manual labor, a change in what the company does or perhaps the company is closing down or relocating.

There are two forms of redundancies, compulsory and non-compulsory.

Compulsory Redundancy

Also known as mandatory redundancy, this is the termination of an employee based on business-related reasons and circumstances as opposed to performance-related or behavioural issues. The company is obliged to make a fair selection of employees that is free from any form of discrimination.

A fair selection process will be based on skills, qualifications and aptitude, as well as the standard of an employee's performance at work, along with  their attendance and disciplinary record.

Unfair selection criteria  includes pregnancy and any reasonings relating to maternity, age, disability, gender reassignment, religious belief, sexual orientation, marriage or civil partnership, as well as if an employee is a part of  or refused to join a trade union or is a part-time or fixed-term employee.

Non-Compulsory Redundancy

Non-compulsory redundancy is also referred to as voluntary redundancy. This is when an organization offers compensation to an employee for voluntarily resigning.  In this instance, companies ask their employees if they’d like to volunteer on the premise of a fair and transparent process. 

It’s important to make it clear that just because an employee volunteered doesn’t automatically mean they will be selected.

Before terminating an employee, companies and employers should take every step to avoid this measure. This could include trying to find suitable alternative employment within the business. It’s important to note that under the notice of redundancy, employees have the legal right to take reasonable time off to look for or train for a new job. 

Unless stated as more than four weeks in writing, employees can also use the time to try an alternative role without forfeiting their right to redundancy pay. 

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Resignation

One of the most common types of contract termination, resignation occurs when an employee makes the decision to leave their job due to an opportunity elsewhere or because they simply choose to no longer work. 

Also commonly referred to as “resigning”, “quitting your job” or “handing in your notice”, most companies have a resignation process that they require their employees to follow. 

Though employers are not legally permitted to reject an employee’s resignation, it is equally important for employees to acknowledge key components, such as the statutory minimum notice period in the UK or notice period, to ensure they are not in breach of their contract.

Resigning via email or recorded delivery and keeping a record of it is best practice for an employee, but resigning in an official written form is also the only accepted, legal and binding form of resignation by an employer.

A letter (or email) of resignation to a manager or HR representative should always include why the resignation is taking place, how much notice is being given and when the last day of work will be. Though it’s not a legal requirement for employers to confirm receipt, it’s best practice. 

Employer responses should acknowledge receipt of the termination, the last day of work, what their employee's final paycheck will be, making it clear what deductions and holiday pay will be included and finally, any expectations of what should be completed before the employee leaves. 

In any instance of terminating an employee, an exit interview is advised, but it is especially useful in instances when the employee has decided to leave.   

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Retirement

To avoid leaving themselves open to claims of age discrimination and unfair dismissal, employers should not (and cannot) force their employees to retire. Employers also shouldn’t be devising a set retirement age for their workforce unless there is a valid reason for doing so that aligns with the achievement of a legitimate aim.

Terminating an employee based on their age is deemed unfair and employers must allow their workforce to continue working until they choose to leave. Employees are entitled to work beyond their state pension age, which means being forced to retire at the age of 65, also known as “compulsory retirement”, no longer exists.

There are a couple of instances that speak to how to terminate an employee in a way that is still fair:

  • When physical abilities are required for the job
  • When there is a legal upper age limit for a job e.g. a pilot cannot fly a plane beyond the age of 65

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Employer Protection: Dismissal and Disciplinary Procedures

All disciplinary rules and procedures around employee performance and conduct should be in writing and distributed to employees. Without the written rules and procedures, employers are liable to pay employees compensation if a tribunal orders them to do so. 

It should be clear what constitutes acceptable and unacceptable behavior in the workplace and the consequences of breaking  rules and regulations should also be clearly stipulated.

Though there is no legal requirement to follow the Acas Code of Practice on disciplinary and grievance procedures, it is strongly advisable. The code elaborates on how to terminate an employee in a lawful and fair way and it encompasses the minimum set of procedures an employer should follow when handling disciplinaries and grievances at work.

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Learn How to Terminate an Employee in the UK with Borderless

When it comes to terminating an employee contract in the UK (or indeed, anywhere!), it’s always best to be prepared so that, despite the challenging nature of doing so, it can be done as fairly and compassionately as possible and in compliance with the law.

Terminating an employee should always be considered as a last resort, and before doing so, employers must be sure that they have exhausted all the other options available to them in a bid to help the employee keep their job.

Unsure how to terminate an employee in the UK? Want to ensure you’re dismissing them in a fair way and in compliance with UK employment laws and regulations? 

Work with an Employer of Record (EOR) in the UK like Borderless. An EOR can ensure compliance throughout the hiring process from contracts to onboarding and of course, employee terminations.

Speak with our team of experts about how you can terminate an employee in the United Kingdom or hire one. 

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Disclaimer

Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.