Wake-up call – What you need to know to ensure dismissal best practice

14 September 2011
Wake-up call – What you need to know to ensure dismissal best practice

XpertHR Small Business - a service run by Caterer's sister website, XpertHR - offers an overview of dismissal best practice

To how much notice of dismissal will an employee be entitled? The employee will be entitled to the period of notice set out in the employment contract, or the statutory minimum period allowed for in the Employment Rights Act 1996, if that is longer.

Where the employee has been employed for at least one month but less than two years, the statutory minimum is one week's notice. After two years' service this rises to one week for each year of continuous service, although a maximum of 12 weeks' notice applies where the employee has been employed for 12 years or more.

Can an employer dismiss an employee without notice if it pays the employee for the duration of the notice period? Yes, an employer can dismiss an employee, pay them for the period of notice and require that the employee cease work immediately and not work out the notice period. This is known as a payment in lieu of notice.

Unless there is an express term in the contract permitting it, this technically represents a breach of the contract of employment, and payments during the notice period are treated not as wages but as damages for breach of contract. The payment in lieu should compensate the employee fully for the wages and benefits that they would have received in the notice period.

Are there any circumstances when an employer can dismiss an employee without notice or pay in lieu of notice? Yes, an employer is entitled to dismiss without notice, or pay in lieu of notice - known as summary dismissal - if the employee has behaved in a way that represents a serious breach of contract. This will usually mean that the employee has committed an act of gross misconduct.

Examples of gross misconduct could include theft, fraud or falsification of documents; fighting or physical violence; and wilful or malicious damage to company property. It is up to each employer to devise its own list of what will constitute gross misconduct based on its specific circumstances and needs.

Does summary dismissal mean instant dismissal? Employers should give a clear indication of what kind of behaviour will be taken to be such a serious breach of contract that it will result in summary dismissal.

Summary dismissal does not, however, mean instant dismissal. The employer should still carry out a thorough investigation of the circumstances before taking the decision to dismiss. The employer should ask if there were any mitigating circumstances, what the employee has to say and whether or not the employee's behaviour was uncharacteristic, given their service and record.

Does a dismissed employee have to be paid for any untaken holiday? If the employee has accrued holiday that has not been taken by the date of termination, they will be entitled to pay in lieu of the holiday.

Alternatively, if the employee has taken more holiday than they have accrued, the employer will be able to deduct the appropriate amount from their final pay provided there is a clause in the employee's contract authorising this.

If an employee is paid in lieu of notice, will their annual leave entitlement accrue up to the termination date, or the end of what would have been the notice period? If an employee receives a payment in lieu of notice, rather than being served notice, the contract of employment ends on the termination date.

However, the employee will be entitled to be paid for what would have been the notice period, and to receive any other benefits, including annual leave, that would have accrued during that period. Therefore, annual leave entitlement will accrue up to the end of what would have been the notice period.

Can an employer deny payment for any outstanding leave where the employee is dismissed for gross misconduct? No, the Employment Appeal Tribunal has ruled that a contractual term stating that no payment in lieu of outstanding leave would be made in the event of an employee's dismissal for gross misconduct was unenforceable. This ruling applies to the minimum statutory annual leave entitlement required under the Working Time Regulations 1998.

Employers may, however, insert a clause into contracts stating that no payment in lieu of any outstanding contractual holiday entitlement over and above the statutory 5.6 weeks' minimum will be paid where the employee is dismissed for gross misconduct.

XpertHR Small Business is the easy-to-use online resource specially tailored to small-and medium-sized businesses, which gives you simple, up-to-date guidance on all employment law and staff issue

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