The end of an employment relationship can be a stressful time for both the employer and employee, regardless of how it comes about. After receiving several enquiries from members relating to issues such as redundancy and settlement agreements, we asked our Associate Sponsors and employment law experts, Bhayani Law, to offer some advice. This guest post, written by Lindsey Gaimster, Director & Head of Employment Law, covers some of the most common situations arising before and during termination. We’ve also signposted to other helpful resources at the bottom of the page.
If an employee wishes to leave, they should inform the employer in writing and state how much notice they are giving before their employment will come to an end.
To determine the right length of notice, the starting point will be the contract of employment. This contract should state how much notice the employer and the employee should give each other and these amounts of time could be different.
There may also be a separate notice period if the employee is still within their probationary period. If there is no contract of employment, there is a statutory minimum that each party must serve:
- If an employee has worked for less than a month then they do not need to serve any notice
- If they have worked for over one month then they will need to give at least one week’s notice.
- In some circumstances, an employee may leave without giving any notice. This could be a breach of contract and you may wish to seek advice as it could be a sign that the employee is looking to bring a claim against the Company.
A redundancy situation can arise when a workplace is closing or moving to a new location. More commonly, it happens when there has been a reduction in work or less people are required to carry out the work.
Before any redundancy process starts, the company should create a full business plan to ascertain:
- which areas of the business are affected
- how many employees are affected
- how many redundancies will be needed.
The company should also consider any ways in which redundancy can be avoided.
Once the company knows the number of redundancies needed, they will start a consultation process. There are slightly different processes depending on whether the number of redundancies needed is more or less than 20.
Provided that a fair consultation process is followed, an employee who is made redundant will be entitled to their notice period, any accrued but untaken holidays and a statutory redundancy payment, if they are eligible. An employee with more than two years service is entitled to a statutory redundancy payment which is calculated based on their length of service, age and weekly pay. The current maximum statutory redundancy payment is £19,290.
A settlement agreement is a legally binding contract which mutually brings the employment relationship to an end. They can be used in a variety of situations but often arise when there is a dispute between the employer and employee.
The settlement agreement sets out the terms of the exit but also ensures that the employee cannot bring any claims against the company. Often a sum of money will be offered to the employee on a tax free basis alongside any contractual rights they already have.
Settlement agreements are complex documents so you should take legal advice before it is offered. There are many benefits to using a settlement agreement when used in the right way and in the right situation.
General exit advice
Regardless of how the employment relationship ends, here are some of our top tips to manage exiting employees:
- Consider whether it is right for the company for the employee to work their notice, or to consider other options such as a payment in lieu of notice or garden leave. The available options may be dependent on the contract of employment.
- Always conduct an exit interview. It might be a bitter pill to swallow but understanding why an employee is leaving could help you retain staff in the future.
- Plan for the exit by drafting a list of company property the employee has and deciding how these be returned. Remember to put in place measures to change passwords and access to systems.
- Remind the employee of any restrictions contained within their contract of employment. This includes: confidentiality, intellectual property, restrictions on where an employee can work after they have left, if they can contact clients and customers, or whether they can work with or employ your other employees.
- ACAS website: Acas gives employees and employers free, impartial advice on workplace rights, rules and best practice.
- Acas templates for employers: example letters, forms, policies and HR documents
- Bhayani Law webpage: Redundancy and handling redundancies
- Bhayani Law webinar: Safe exits – Settlement agreements and the exit process
- Bhayani Law webpage and video: What are settlement agreements?
Need more information?
If you have questions that are not covered in this post, please let us know by emailing our Company Membership Manager, Emma Marshall. Bhayani Law is very happy to offer more help to our members either through a podcast episode or a webinar, which addresses your questions – so tell us what you need to know and we’ll get this organised. All questions sent to us will be handled with complete confidentiality.