Whether the employee resigns or the employer dismisses the employee, notice usually needs to be given to end the employment relationship. While this may seem straightforward, it is not always so clear in practice and issues around notice can lead to costly legal disputes.
‘The timing and amount of notice given can determine if the employee has the right to bring an unfair dismissal claim or if the employee misses out on an annual bonus payment,’ explains Kat Moody, a Solicitor in the employment team with Richard Reed Solicitors. ‘Not complying with the notice provisions in the employee’s contract of employment, can release them from restrictions that are intended to protect the employer’s business after the employee’s departure.’
Kat sets out the requirements relating to notice and looks at a number of pitfalls. This article does not address the scenarios where employment can be brought to an end without notice because of the employer’s or employee’s conduct or at the end of a fixed term contract.
Minimum contractual or statutory notice periods
Employers must give an employee a minimum amount of notice to bring their employment to an end. This statutory minimum requirement increases with the employee’s length of service:
| Length of service | Minimum notice the employer must give |
| Less than one month | 0 |
| One month up to two years | 1 week |
| Two years up to twelve years | 1 week for each year of employment |
| Twelve years or more | 12 weeks |
An employee must give one week’s notice, if the employee has been employed for one month or more.
The statutory minimum will trump whatever is written in the contract, if less than the statutory minimum. If either party gives a shorter notice period, even though it is set out in the contract, it will still be a breach of contract.
Nothing on notice in the contract: can we just give statutory notice?
Complying with the statutory notice period is not the end of the story. For more senior employees, a court or employment tribunal may imply a longer notice period into a contract which does not have any notice provisions. This is on the basis of what a court determines is reasonable, taking into account factors such as the individual’s seniority and industry standards.
Minimum notice requirements from the employee
To protect your business, it is often sensible to require employees to give more notice than the statutory minimum of one week, by including a longer notice period in their contract. To be acceptable to the employee, this may need to be in keeping with the standard for the sector and level of seniority.
Uncertain terms in the contract
The contract should specify how notice should be given. Unless the contract says that notice has to be given in writing, it can be given verbally. However, this can lead to arguments over when the notice period commenced and expires. This in turn can have implications for the calculation of employee benefits and how long they have to bring certain employment tribunal claims, as the time limit starts to run on the day employment ended. There may be different opinions over what was said and even whether this meant notice was actually given or not.
Clear wording avoids disputes later. Well-drafted contractual clauses ensure that the contract works well in practice. For instance, it can include a shorter notice period during the probationary period (but not shorter than the statutory minimum).
Not complying with the contractual notice requirements
Particularly for more senior employees, contracts often require longer notice periods than the statutory minimum. Giving the employee less notice than the contract requires puts the employer in breach of contract. This means:
- the employee may have a case for wrongful dismissal and, if so, can claim for the pay and other benefits they would have received during the full notice period; and
- the employee could insist that their contract continues, by what is known as ‘affirming’ the contract. Although this is rare, it allows the employee to remain employed and qualify for benefits that accrue after a certain date, such as a bonus.
If the employee does not give enough notice, the employer could bring a contract claim for additional costs such as taking on temporary staff, but this is rare in practice.
Agreeing a shorter notice period or no notice
Having been given notice or resigned, the employee may wish to leave sooner rather than work out their notice period. This may be an attractive option for the employer, for instance if they think the employee may just be ‘killing time’ during their notice or the relationship has gone sour and they prefer to distance the employee from key clients. We can help ensure that this is properly recorded to avoid the employee subsequently arguing they were underpaid for their notice or they were released from contractual obligations.
Trying to avoid unfair dismissal protection by giving short notice
Although this is set to change when the Employment Rights Bill takes effect, currently an employee can usually bring a claim for unfair dismissal only once they have two years’ employment at the date their employment ends. If the employee is very close to the second anniversary of their employment, giving them less than the statutory one week’s notice to stop them gaining protection from unfair dismissal does not work. When working out the length of service for unfair dismissal rights, the tribunal will add on the amount of statutory notice that should have been given.
Making a payment in lieu of notice outside the contract terms
Giving the employee a lump sum payment instead of giving notice, called a ‘payment in lieu of notice’ (PILON), can seem a neat way to bring the relationship to an end quickly. However, this would be a breach of contract if the contract does not allow for it, even if the employee seems happy with this arrangement,. This means the employee is released from any restrictive covenants that could otherwise curtail their activities once their employment ended, such as prohibiting them from working for a competitor for a specified period.
PILONs should be carefully worded to address any payments and benefits that the employee would have otherwise received, such as health insurance and accrued holiday entitlement. If you wish to make a PILON but the employee’s contract does not address this, please speak to us first to ensure you do not give up valuable protection for your business or create the risk of a wrongful dismissal claim.
How we can help
We can ensure that your employment contracts are clearly worded, give you flexibility to make a payment in lieu of notice, if desirable, and to help avoid any pitfalls. We can also advise you on minimising risk if the proposed dismissal could breach the employee’s contract.
For further information, please contact Kat Moody in the employment team.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
