Termination of Employment

How do you terminate employment as an employer or employee, and how do you make sure you stay the right side of UK law? Check our best practices guide here.
  • Author: Siva
  • Last updated: July 11, 2022
  • 5 Minutes
termination of employment in the UK best practices explained by Papershift

Termination of employment is a very common procedure for most companies. But it is also a very sensitive matter fraught with pitfalls and legal issues. 

Terminating employment as an employee or employer has to be done the right way and in the right manner. If it isn’t the individual or business could find themselves in hot water. 

But how do you terminate employment as an employer or employee, and how do you make sure you stay the right side of UK law? 

We will look to answer this question and more in our guide to termination of employment. Read on to find out more.

What Is Termination of Employment?

In simple terms, termination of employment is where either an employer or an employee ends their working contract with another party. This usually happens when the contract between an employer and an employee is officially ended and is done in writing.

The term “termination of employment” is often (and incorrectly) used as a synonym of ‘dismissal’. The truth is that under UK employment law, termination of employment can be carried out at either the employer or the employees’ will. Therefore, either party can initiate the procedure.

For an employer, termination of employment means that the staff member in question leaves the business and stops working for the company. The employer will no longer have to pay the employee (except back pay for any hours worked) or offer them any of the privileges they had whilst working for the business.

For an employee, termination of employment means that they exit the company they work for and will no longer be obliged to work for them. They will no longer receive pay (except any owed back pay and/or bonusses) and will no longer have access to any of the privileges they had access to whilst they worked for the company.

What are the different types of termination of employment?

There are a variety of different ways that employment can be terminated, these include: 

  1. Dismissal due to a disciplinary matter.
  2. Redundancy from the company.
  3. Resignation by an employee.
  4. Retirement.
  5. The end of a fixed-term contract.

The different types of termination of employment contracts can usually be categorised as involuntary or voluntary. The former happens when the employer ends the contract, while the latter is used in cases where the employee chooses to leave the company.

Let’s have a look at the categories in more detail:

Dismissal

This is when the employer ends the contract. It can be due to business needs or the employee’s misconduct. In any case, employers must provide valid reasons that can be justified, or they could face an unfair dismissal tribunal.

Redundancy

Redundancy happens when there is a need to reduce the workforce. It is a form of dismissal without cause and an employer can make staff redundant even if they have performed well in the role.

Employers are obliged to conduct a selection process to decide on whose contracts will be ended in a fair way. Alternatively, they can provide a redundancy package and allow staff to choose voluntary redundancy.

Resignation

Resignation is one of the most common types of employment contract termination. It refers to a situation when an employee decides to leave their job to either join a new company or simply stop working.

Retirement

Employers can no longer force employees to retire. Employees must now give notice to their employers of their wish to retire and keep working during the notice period in order to allow the company to find a suitable replacement.

Employees may also choose full or part-retirement, if their employer allows it. When opting for part-retirement, they are entitled to a percentage of their pension pot. 

End of a Fixed-term Contract

Fixed-term contracts usually end at an agreed-upon date. If an employee, however, has worked at a business for two years or more, the termination of the contract must be treated as a dismissal. As with any dismissal, the employer will have to prove there’s a fair reason for the contract not to be renewed. 

If the employee continues to work after the contract end date, it is automatically implied that the employer agrees for the working relationship to continue.

What is the minimum notice period for termination of employment?

Under UK employment law, both the employer and the employee are entitled to a notice period for the termination of employment.

The notice period is usually set out in the contract of employment, but there is a statutory minimum notice period to consider. This is:

  1. One week for employees who have worked at the company between one month and two years.
  2. One week for each year worked for employees who have worked at the company between two and twelve years.
  3. Twelve weeks for employees who have worked at the company for twelve years or more.

What is a termination of employment letter?

A termination of employment letter is a formal document that notifies other interested parties of the end of an employment contract.

An employer might issue an employee with a termination of employment letter when they are dismissing them or making them redundant, and an employee might provide their employer with one when they resign or intend to retire.

A notice of termination letter can be tough to write. It’s easy to say the wrong thing and upset the other parties when there is no intention to do so. 

These are some items to include in a termination of employment letter that will make sure you convey all correct information:

  1. Reasons for terminating the contract.
  2. The date the contract will end.
  3. Details of final pay and compensation for unused holidays.
  4. Arrangements regarding devices or any properties of the company that the employee must return.
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In conclusion

Termination of employment doesn’t have to turn into a burdensome task for employees and the company they work for. Once you know the law and have appropriate tools to manage the process, you’ll be able to take care of it just like any other daily task.

For more helpful workplace guides, check out the rest of our website.



Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)