Employment Law

5. Dismissals

5.1 If the contract of employment does not specify a notice period, an employee is entitled to a 'reasonable period of notice'. In either case, the employee is entitled to at least the statutory minimum notice period of one week after one month's employment. After this, entitlement increases at the rate of one extra week per year, to a maximum of 12 weeks after 12 years' employment.

5.2 If you dismiss an employee without the right notice, this will be wrongful dismissal.

• The employee is usually entitled to normal remuneration (both salary and benefits) during the notice period. This applies even if you wish to end the employment immediately, unless there was gross misconduct or the employee suffers no financial loss (eg by immediately starting a new job at a better rate of pay) or if you have reserved the contractual right to pay salary in lieu of notice without benefits.

5.3 If an employer breaches the contract, the employee may be able to resign immediately and claim constructive dismissal if the breach was material, going to the root of the contract.

• For example, if you reduce pay without agreement, or tell the employee to resign.

5.4 An employee (even a part-timer) with one year's continuous service who is dismissed without a fair reason and reasonable treatment can claim unfair dismissal.

• From 6 April 2009, you have been required to act 'fairly and reasonably' when dismissing an employee (or carrying out any other disciplinary procedure).Acas has produced a Code of Practice on Disciplinary and Grievance Procedures that provides practical guidance and principles to help you act fairly.
• If a dismissal is unfair, an employee can ask the tribunal to order re-employment or award compensation. The basic award is £12,000 (depending on age and length of service) and compensation for financial loss up to a maximum of £68,400.
• If you unreasonably failed to follow the Acas Code, the compensation awarded against you (if you unfairly dismissed an employee) can be increased by 25 per cent.Equally an employee that unreasonably failed to follow the code could have any compensation reduced by 25 per cent.

5.5 If an employee chooses to leave your business, as opposed to being asked to leave, you can usually require him or her to work out the full notice period.

• If the employee refuses to work out the notice period, he or she will not be entitled to be paid for it.
• If you insist the employee must stop work immediately, or before the notice period ends, you must still pay what would have been earned during the notice period.
• If you both agree that the employment should end straight away, no further payment needs to be made.

5.6 Employees who are made redundant are not entitled to claim redundancy pay until they have over two years' service.

• Tax is not payable in respect of statutory redundancy pay.
• Payments to an employee in lieu of notice used to be tax-free (under £30,000). Check with your legal adviser.
• Avoid claims that a redundancy is unfair dismissal by ensuring that it is genuine. In general, the job must have disappeared.
• The employer must also select employees for redundancy on a fair and objective basis, after reasonable consultation, and with adequate notice and a fair appeals procedure.