When workers leave your employment
An employee might leave your employment for a number of reasons.
They may resign or retire, or you may dismiss them because of redundancy or their poor performance. Sadly it could even be that they die while in your employment.
For each of these reasons you need to consider a number of issues, including the need to follow a proper dismissal procedure, giving notice periods, writing references and calculating final pay.
Every business has a slightly different way of dealing with workers leaving. Some matters are legal requirements, while others are simply a question of good practice.
This guide explains how to prepare for ending a person's employment and how to make the process as smooth as possible.
When a worker leaves your employment: the process
It is important to have a set procedure in place to help you when a person's employment ends for whatever reason.
Confirmation of leaving
Confirm with the employee:
- the start date of the notice period, if any - see how to issue the correct periods of notice
- the date they'll leave
For resignations, you should get written confirmation from the employee that they do actually intend to resign and the date of their resignation. This will help clarify when their notice period begins and ends.
For more information, see when an employee resigns.
When dismissing an employee
Employees who have worked for you continuously for a year or more are entitled to request a written statement of reasons for their dismissal. You must provide the written statement within 14 days of the request.
It's good practice to provide one even if they don't request it. The reasons for dismissal you give should be as detailed as possible.
Where employees are pregnant or on statutory maternity/adoption leave, you must provide the statement (even if not requested) regardless of their length of service.
Managing the handover process
If the leaver is to be replaced, organise a handover timetable during the notice period so the replacement employee taking over their work knows what is involved.
Where appropriate, agree with the employee the terms of an announcement to other staff about their departure.
Working out final payments
You will need to work out:
- how much pay is due, including pay for any untaken holiday
- what should be deducted from their final pay, eg a low-interest loan repayment
For more information on making final payments, see calculating final pay when a worker leaves employment.
Conduct a formal exit interview with the employee before they leave to discuss reasons for leaving or get feedback on how the business could be improved. For more on exit interviews, see resignations: conducting exit interviews.
The law doesn't generally require you to give a departing employee a reference unless stated otherwise in their contract, but it is good practice to ask whether they want one. Read more on workers leaving: providing references.
Retrieving company property
This includes retrieving security passes, uniforms, laptops, etc. You may want to consider changing computer codes and passwords.
Workers leaving: notice periods
The required notice period is the statutory amount or the amount agreed in the contract of employment, whichever is longer.
The employee's required notice period must be given in their written statement or the statement must refer to the relevant legislation on notice periods. See how to issue the correct periods of notice.
To avoid disputes, most employers specify that notice must be given in writing.
Pay during notice
Employees who work the hours set out in their contract during the notice period should receive their usual rate of pay.
Employees are also generally entitled by law to receive their normal pay during the notice period even if they do not work, for instance because they are ill or because they are willing to work but you do not give them any to do.
Pay in lieu of notice
If you want employment to end immediately, you can make a payment instead of allowing the employee to continue working - a payment in lieu of notice (PILON). However, you can only make a PILON if the contract allows for this or your employee agrees to it.
A PILON should cover salary - including any bonus required under their contract - until the end of the notice period together with the cash equivalent of benefits in kind, unless their contract says otherwise.
Pay for untaken outstanding holiday
Pay owed to the employee for any accrued untaken holiday should be paid in addition to pay in lieu of notice.
For more information, see holiday pay on termination of employment.
Workers leaving: providing references
Except for certain employers in the financial services sector, employers don't generally have to give a departing employee a reference unless this is a requirement of the employment contract.
However, sometimes employers routinely provide their employees with a reference when they leave.
Note that if you refuse to provide a reference for an employee who has brought an unlawful discrimination claim against you, the employee could also bring a victimisation claim against you if they believe you are withholding the reference because of their discrimination complaint.
You should consider carefully the legal implications of providing a reference:
- make sure that what you say is true, accurate and a fair representation of the person
- an ex-employee could bring an action against you for libel, discrimination or defamation of character through a court or tribunal, if they consider the reference to be inaccurate
Employees' access to references
Employees may be able to gain access to a reference if they take legal action, eg a sex discrimination claim. See how to prevent discrimination and value diversity.
Individuals may also gain access to a reference if they make a subject access request to the organisation to whom the reference has been provided. They will be able to request a copy of the reference from the prospective employer to whom it is provided.
While the organisation giving the reference in confidence is under no obligation to provide access the receiving organisation may be.
In addition, you should avoid giving an unsatisfactory employee a good reference, because:
- a good reference could weaken your case in any claim for unfair dismissal by the ex-employee
- any new employer could claim damages if the employee proves to be unsatisfactory and material information was omitted from the reference
Contractual matters when workers leave your employment
Employment contracts will contain provisions relating to the termination of the contract. In addition to notice periods, these may include:
- Any date set for retirement - although you can only operate a set retirement age if you can objectively justify it. Justification of direct age discrimination must be based on 'social policy objectives', such as those related to employment policy, the labour market or vocational training. This means the aims must be of a 'public interest nature', rather than purely individual reasons particular to one employer's situation. Read more on when an employee retires.
- Whether pay can be given in lieu of notice - read more on notice periods.
- Reference requirements - read more on providing references.
Some businesses also put restrictive covenants in the contract of employment. These are designed to prevent employees from disclosing or using confidential information, trade secrets, etc, and/or soliciting or dealing with customers during a specified period after leaving the business.
It is a good idea to take advice from a solicitor before drawing up such restrictive covenants or other clauses to ensure they will be enforceable.
Some employers ask employees who are dismissed or who resign to work out their notice but not to come into the workplace. This is known as 'garden leave'. The employee stays on the payroll and is still employed during the period of garden leave, but is not required to attend work.
For more information on notice periods, how to issue the correct periods of notice.
If you want to be able to rely on garden leave as a means of retaining control over the employee during the notice period, it is advisable to include an express clause in the employment contract permitting this. Read more on the employment contract.
Any period of garden leave should be taken into account when you decide on the duration of restrictive covenants.