Dismissing staff and redundancies

When dismissing an employee from their role there are a number of requirements that you need to follow to make sure that the dismissal is fair in law.

30th April 2018

How much notice should I give?

You must give your employee sufficient notice before dismissing them. Notice periods are often contained within an employment contract, but if not, the employee is entitled to a minimum statutory notice period, based on their length of service, as detailed below (these minimum notice periods also apply to staff on probation):

Length of time worked for employer Amount of notice you must give
Less than 1 month No notice period, though the employee is entitled to “reasonable” notice, which will often be based on how often they are paid
One month or more One week's notice
Two years or more Two week's notice
Every additional year beyond two years One additional week’s notice, up to a maximum of 12 weeks

Fair reasons for dismissal

You must abide by certain rules for a dismissal to be considered fair in the eyes of the law. If you do not dismiss an employee in a fair manner then you may face a claim from your employee for unfair dismissal.

You must abide by certain rules for a dismissal to be considered fair in the eyes of the law.

Whether a dismissal is fair or unfair depends on the reason for the dismissal, and how the dismissal is carried out by you, the employer. To establish a fair dismissal you must have a potentially fair reason for dismissing the employee. Reasons which can serve as grounds for a fair dismissal include:

  • The employee is incapable of doing the job to the standard required.
  • Their conduct has been questionable.
  • Redundancy (see below).
  • There are legal reasons why they are unable to do the job, such as losing a driving licence.
  • If it is no longer possible to continue employing the person, for example because a customer of the business refuses to work with that person.

Unfair reasons for dismissal

There are a number of reasons for dismissal which are known as ‘automatically unfair’. For example, you cannot dismiss an employee fairly because:

  • They are pregnant or on maternity leave, or any reason related to this.
  • They take time off for family reasons.
  • They act as an employee representative, trade union representative or occupational pension scheme trustee.
  • They have joined or not joined a trade union.
  • They working part-time or on a fixed-term contract.
  • They assert certain statutory rights for example relating to pay and working hours.
  • They report on wrongdoing at work (whistleblowing).

Dismissing an employee for any of these reasons will automatically be deemed unfair without the employee needing to be employed for any particular length of time (see below).

For a dismissal to be fair you must act ‘reasonably’ throughout the dismissal and the preceding disciplinary process.

In the case of employees taking strike action, it is automatically unfair to dismiss an employee for taking official strike action within 12 weeks of the action commencing or if it has lasted more than 12 weeks and you haven’t taken reasonable steps to resolve the dispute.

A fair dismissal process

For a dismissal to be fair you must act ‘reasonably’ throughout the dismissal and the preceding disciplinary process. While reasonable behaviour in this context is not defined in any statute, for an Employment Tribunal to find that you have acted fairly you will usually have to:

  • Have a reasonable belief that the reason for the dismissal was established
  • Carry out proper investigations when appropriate
  • Follow the relevant procedures including any procedures in your own handbook or employment contract
  • Inform the employee of why they were being considered for dismissal and listen to their views on the matter
  • Allow the employee to be accompanied at any hearings
  • Give the employee a chance to appeal

The procedures you should follow are the Acas code of practice for disiplinary and grievance procedures. These are not legally binding, but are the best practice guide that an Employment Tribunal will expect an employer to follow.

Dismissing a member of staff on sickness grounds

An employee’s ability to do their job may be affected by a long-term illness. In these cases, before considering dismissal, try to help them back to work. You can do this through:

  • Getting a medical report from the employee’s GP.
  • Arranging an occupational health assessment.
  • Determining whether they are considered disabled under the Equality Act 2010 and making. reasonable adjustments to help them carry out their role.

If reasonable adjustments cannot help the employee to do their job, it may be fair for you to dismiss them, even if they are disabled. However, you must still ensure that a fair procedure is followed.

If the Employment Tribunal finds that an unfair dismissal has taken place then they can order you to reinstate the employee to their old job, or to find a new job for them at your company.

Claims for unfair dismissal

If an employee believes that you have dismissed them unfairly, then they can lodge a claim at the Employment Tribunal, who will make a judgment on whether the dismissal was fair or unfair.

Unless the employee was dismissed for an automatically unfair reason as mentioned above, they must have worked for you for a minimum amount of time in order to be eligible to do so. This is shown in the table below.

Date when employment started When employee can make a claim
Before 6 April 2012 After first year of employment
After 6 April 2012 After second year of employment

There are a number of other exceptions which mean that certain groups of people are not eligible to claim unfair dismissal. These are:

  • The self-employed
  • Independent contractors
  • Members of the armed forces
  • Employees who have already reached a settlement about the dismissal with their employer through ACAS
  • Those employed under an illegal contract
  • Taking part in official industrial, unless the reason is automatically unfair (see above)
  • Police staff, except in cases relating to health and safety or whistleblowing
  • Those who have signed a settlement agreement with their employer
  • Workers on fishing boats who are paid out of the profits made by the boat

If the Employment Tribunal finds that an unfair dismissal has taken place then they can order you to reinstate the employee to their old job, or to find a new job for them at your company.

The Employment Tribunal can also order compensation to be paid. This will be made up of a basic award and a compensatory award. The amount of the basic award depends on factors such as the employee’s age, gross weekly pay and length of service.

An employee who is dismissed for gross misconduct generally forfeits their right to notice or a notice payment

The compensatory award compensates the employee for the money lost due to losing their job, and is capped at £83,682 (until 5 April 2019) or a year’s salary, whichever is lower. These limits do not apply to cases relating to health and safety and whistleblowing.

Constructive unfair dismissal

Even if your employee resigned from your company, they may still be able to make a claim against you if they feel that your actions have forced them out. This is known as constructive dismissal. Examples of situations which may lead to a claim for constructive dismissal include:

  • Non-payment or late payment of wages
  • Changing working conditions without asking the employee
  • Harassment or insulting language

Wrongful dismissal

You may be guilty of wrongful dismissal if you dismiss an employee in breach of the rights under the employee’s contract of employment. This most commonly occurs when the employee is not given the notice stated in their contract or the procedure laid down in the contract is not followed properly.

Even if no notice period is stated in your employee’s contract, they may still be able to base a claim on their statutory right to notice as set out above. An employee who is dismissed for gross misconduct generally forfeits their right to notice or a notice payment.

Redundancy

Redundancy is when you dismiss an employee or employees because you no longer need anyone to do their job due to changes in the company , such as the work they were doing no longer being available, or the workplace closing down.

Your employees have certain rights in relation to redundancy. As well as possibly being entitled to redundancy pay (both statutory and contractual), they have the right to reasonable time off to look for a new job or arrange training and to not be unfairly selected for redundancy.

If you select someone for redundancy for any of the following reasons, then you may face a claim for unfair dismissal and/or discrimination:

  • Gender
  • Marital status
  • Sexual orientation
  • Race
  • Disability
  • Religion or belief
  • Age
  • Membership or non-membership of a trade union.
  • Health and safety activities.
  • Working pattern (e.g. part-time or fixed-term employees).
  • Maternity leave, birth or pregnancy.
  • Paternity leave, parental or dependants leave.
  • Their exercise of their statutory rights.
  • Whistleblowing (e.g. making disclosures about wrongdoing).
  • Taking part in lawful industrial action lasting 12 weeks or less.
  • Taking action on health and safety grounds.
  • Doing jury service.
  • They’re the trustee of a company pension scheme.

Even if you can show that the reason for the redundancy is genuine, you will also have to show that you have followed a fair procedure when you select the employees who will be made redundant. Common fair ways of selecting employees for redundancy include:

  • Asking for volunteers.
  • Using disciplinary records.
  • Using appraisal scores, skills, qualification and experience.

Consultations

Any member of staff that you choose to make redundant will be entitled to consultation on the matter, where they can discuss the reasons for their selection and any alternatives.

If you are making more than 20 employees redundant then the consultation should take place with a representative, either from the trade union or elected from the workforce. There is also an obligation to report the redundancies to the Secretary of State for BEIS where more than 20 employees will be made redundant.

For the length of the consultation, the following minimums exist:

For each year your employee was: They will receive:
Under 22 Half a week's pay
Between 22 and 41 One weeks pay
Over 41 One and a half week's pay

Certain caps do however apply to redundancy pay. Length of service is capped at 20 years, while the maximum redundancy pay per week is £508 (until 5 April 2019). A maximum amount of a statutory redundancy payment is £15,240 (until 5 April 2019).

The gov.uk website contains a helpful employee redundancy calculator.

However, you will not have to pay this to your employee if you offer to keep them on or you find them suitable alternative employment.

Notice periods

As an employer you are obliged to give employees a minimum notice period before their redundancy takes effect (see above). These are known as statutory notice periods and depend on the employee’s length of service with your company

Payment in lieu of notice

Instead of asking an employee to work for you during the notice period, it is possible as an employer to dismiss the employee immediately and make a payment to them for the notice period, providing there is a provision for this in their contract.

Settlement agreements

Upon the dismissal of an employee, that employee and their employer can enter into what is known as a Settlement Agreement. Through a Settlement Agreement the two parties can settle any employment claims that may be made by the employee after they leave.

By entering into a Settlement Agreement the employee waives their right to make any claims, such as unfair dismissal.

Settlement agreements can be beneficial for employers as it means that they do not have to worry about any later repercussions of dismissing the employee, such as having to attend an Employment Tribunal. They can also be much simpler and stress-free to arrange than a claim that has to go through the courts or an Employment Tribunal.

By entering into a Settlement Agreement the employee waives their right to make any claims, such as unfair dismissal.

Before reaching a Settlement Agreement with an employee, it must be ensured that they have received legal advice from an independent adviser first. This adviser should be a qualified lawyer, a trade union representative or an advice centre representative.

You should acquire a certificate from the adviser confirming that they have given advice to the employee on the terms and effect of the agreement. The advice will also confirm that the adviser has the necessary insurance.

Examples of terms that a settlement agreement may contain include:

  • An amount of compensation offered to the employee
  • Assurances given by both the employer and employee
  • Indication that all terms have been accepted by the employee and that they will not take legal action in future
  • A letter of reference which can be used by the employee in future job applications.
  • A ‘non-compete’ clause which places some restriction on the type of jobs the employee is able to apply for in the future
  • Payment of tax

Confidentiality clause – i.e. that the employee cannot disclose some or all of the details of the Agreement or the termination of their employment to anybody.

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