Essential guide to dismissing employees

Dismissing an employee may be your best option if the employee's conduct or performance is unacceptable, or if you need to make employees redundant.

Fair-minded employers have little to fear from employment-protection legislation. The issues are fairly straightforward and most problems can be avoided by following a few simple rules.

Dismissing an employee for misconduct

Dismissing an employee for inability to perform

Other permitted reasons for dismissing employees

Unfair and unlawful dismissal

Dismissing employees - special cases

Complaints

1. Dismissing an employee for misconduct

A friendly word from a supervisor or manager can resolve most problems. But, if necessary, dismissing an employee for misconduct is usually relatively straightforward.

Write down clear, reasonable rules and procedures

These should include:

• What the disciplinary offences are.
• What procedures will be followed if an employee commits a disciplinary offence. These procedures should be fair and reasonable in line with the Acas Code of Practice.
• Which offences provide grounds for summary dismissal.
• What rights of representation and appeal employees have.

Make employees aware of the rules

• Give each employee a copy of the rules and explain them all. It is difficult to discipline employees for breaking a rule if they are not aware of it.
• Include the procedures in the written terms of employment, or explain where a copy of them is available.

Most offences will lead to a series of oral and written warnings before any dismissal

• Investigate the circumstances before taking any formal action.
• Typically, you might give an employee one verbal warning and two written warnings before dismissal. Verbal warnings will often be removed from an employee's disciplinary record after six months and written warnings after 12 months (if there are no further disciplinary offences).
• A formal warning should include a time limit for achieving improvement and an explanation of the consequences of not doing so.
• Apply the rules fairly and consistently. An employee who can show that you applied the rules inconsistently may be able to claim unfair dismissal or even unlawful discrimination.
• Keep written records of all disciplinary action you take. Include a record of any steps you have taken to investigate and address the cause of the problem.
• All employees have the right to be accompanied by a colleague or trade union official at any disciplinary hearing.
• Remind employees of their right to explain their conduct or suggest counter-proposals.

'Gross misconduct' can provide grounds for summary dismissal

• You should still follow a procedure that is reasonable and fair.
• Gross misconduct typically includes theft, fighting or physical assault; drunkenness or drug-taking; wilful damage to company property and intentional or reckless disregard for safety rules.
• In most cases, follow the procedures outlined in the Acas Code of Practice: review the evidence, provide a written explanation of the problem, have a face-to-face meeting and give an opportunity to appeal.
• In exceptional circumstances, you might be justified in not following the Code of Practice but you should be aware that an employment tribunal can increase any award by 25% if you do not.
• In practice you should always investigate the incident thoroughly (suspending the employee on full pay if necessary) before making any decision to dismiss.

Employees have the right to appeal against all disciplinary decisions

• State the name or job title of the person responsible for hearing any appeals.
• Where possible, the person dealing with the appeal should not have been involved at any prior stage of the proceedings.

Give the appropriate notice, unless the employee has been summarily dismissed

• After a month's service, employees have a statutory entitlement to one week's notice (unless summarily dismissed). After the first year, an employee is entitled to an extra week's notice for each additional year of continuous service, up to a maximum of 12 weeks' notice (after 12 years of service).
• The contract of employment may entitle the employee to a longer period of notice.
• An employee dismissed without proper notice can claim wrongful dismissal.

Provide written reasons for the dismissal

You are legally required to do this:

• within 14 days of a written request from an employee who has completed at least one year's continuous employment
• whenever you dismiss an employee who is pregnant or on maternity leave, regardless of how long she has worked for you

2. Dismissing an employee for inability to perform

Normally, new recruits who are incompetent or underqualified will be discovered fairly quickly. They can then be dismissed without running the risk of a claim of unfair dismissal (see Dismissing employees with short service).

There are four 'permitted' reasons for dismissing employees who are unable to perform

• Incompetence (lacking the skills or aptitude to carry out duties effectively).
• Lack of relevant academic, technical or professional qualifications.
• Sickness or injury (usually associated with frequent or prolonged absenteeism). However, it is unlawful to dismiss an employee for a long-term sickness or injury that qualifies as a disability.
• Because it would be illegal for the employee to carry on working in the job. For example, if the employee loses the required driving licence.

You must be able to demonstrate that you acted fairly and reasonably

• This applies to both the decision to dismiss and the way you carried out the dismissal.
• Was the employee really unable to perform or was this an excuse for dismissal? For example, has the employee worked satisfactorily, despite having no qualifications?
• Did you provide appropriate support or training where needed?
• Did you investigate the circumstances fully?
• Did you consider alternative options?
• Did you set out your concerns in writing and give the employee time to consider and discuss them with you?
• Did you ensure the employee knew about his or her right to appeal?

Where dismissal is contemplated, you must follow fair and reasonable procedures

• Any employee dismissed must be given appropriate notice and may be entitled to written reasons.

3. Other permitted reasons for dismissing employees

You can dismiss an employee because of redundancy

• For example, if a business (or part of a business) closes, relocates or is restructured, or if there is a reduced need for employees doing a certain kind of work.
• The redundancy must be genuine.
• There are special rules governing the selection of employees for redundancy.

You can no longer compulsorily retire employees when they reach 65

• The default retirement age has been scrapped.
• You can still dismiss an employee citing age, but only when you can objectively justify your action.

You can dismiss an employee for 'some other substantial reason'

• For example, a refusal to co-operate with a generally accepted change in working practices which is required for the profitability or survival of the business.
• Again, you must use fair and reasonable procedures.

4. Unfair and unlawful dismissal

Any employee with at least two years' service is protected against unfair dismissal

• This is reduced to one month's service where the dismissal is on medical grounds.
• Unless the employee was reasonably dismissed, he or she can claim unfair dismissal.
• Compensation for unfair dismissal is made up of a basic award, taking account of age and service and capped at £20,000, and a 'compensatory award'. The upper limit on compensatory awards is £115,115.

Regardless of length of service, some reasons are inadmissible

It is automatically unfair to dismiss any employee for:

• Being pregnant, giving birth or taking advantage of statutory maternity rights. An employee who fails to return to work after maternity leave will be held to have terminated her own employment (unless the leave is extended on medical grounds).
• Carrying out (or proposing to carry out) functions as an appointed or elected safety representative or member of a safety committee.
• Carrying out (or proposing to carry out) functions as an employee representative.
• Pointing out (or reacting to) imminent risks to health and safety.
• Membership (or non-membership) of a trade union, or taking part in union activities. It is unwise to dismiss a shop steward without first discussing it with a full-time union official.
• Carrying out (or proposing to carry out) functions as a pension scheme trustee.
• Questioning or challenging your apparent disregard for statutory employment rights.
• Reporting superiors or colleagues for illegal or dangerous activities to an internal or external authority ('whistle-blowing').
• Jury service.

Discrimination is not allowed

Regardless of length of service, it is unlawful to dismiss any employee on the grounds of:

• gender or gender reassignment
• marital or civil partnership status
• race, nationality, or national or ethnic origin
• sexual orientation - actual or perceived
• disability - this may include a physical or mental illness likely to last at least a year
• religion or philosophical belief
• age, unless you can objectively justify this

An employee with two years' service may resign and claim constructive dismissal

The employee can do this if your conduct as an employer has breached a fundamental term of the employment contract. This might include anything that makes it impossible or intolerable for the employee to continue doing the job, such as:

• cutting (or attempting to cut) an employee's salary or other contractual benefits
• transferring an employee to a different job or location in the absence of any express or implied contractual right to do so
• subjecting anyone to bullying, abuse or unfair criticism

Employees must try to get matters redressed through the grievance procedure, before they can claim constructive dismissal.

You cannot normally dismiss employees in connection with a business transfer

• Dismissing employees in connection with the purchase, sale or transfer of a business is usually unfair under the Transfer of Undertakings (Protection of Employment) or TUPE regulations.
• You cannot dismiss employees unless you have a sound economic, technical or organisational reason.
• Dismissing an employee to facilitate the sale of a business is likely to be unfair.

You must follow fair, reasonable and transparent procedures

• Otherwise, employees who claim unfair dismissal will be automatically awarded it. Their compensation may be increased by up to 25%.

'Employee-owners' and 'employee-shareholders' have fewer employment rights

• Employees adopting employee-owner or employee-shareholder status under The Growth and Infrastructure Act 2013 forego some employment rights - including the right to ordinary protection from unfair dismissal - in return for shares in the business.

5. Dismissing employees - special cases

Some of the more common situations which lead to confusion or problems are outlined below. If in doubt, take legal advice.

Many directors are both office-holders and employees

• A director may be removed from office in accordance with the company's Articles of Association or the requirements of the Companies Act 2006, but may nevertheless remain an employee.
• A director who is also an employee has the same legal protection against unfair or unlawful dismissal as other employees.

You cannot usually dismiss employees taking 'protected' (official) industrial action

• Employees dismissed while taking 'protected' industrial action might claim unfair dismissal.
• You may be able to dismiss employees taking official action if it has gone on for more than 12 weeks and you have taken reasonable steps to resolve the dispute.
• Employees taking unofficial strike action can be dismissed.

You can dismiss a temporary replacement once the permanent employee returns to work

• For example, when an employee returns after maternity leave.

6. Complaints

An employee must normally raise a grievance with you before complaining to an employment tribunal

• Treat the grievance seriously. Apply your procedures fairly and consistently.
• If the employee then complains to an employment tribunal, an Acas conciliator will be appointed. Early conciliation from Acas is mandatory.
• A conciliator cannot help without the consent of both the employer and employee.

It may be possible to reach an 'out of court' agreement

Only two forms of agreement are legally binding:

• a 'COT3' agreement reached with the participation of an Acas officer
• a 'settlement agreement' (previously known as a compromise agreement) in a suitable form where the employee has had appropriate independent legal advice

If conciliation fails, an employee can complain to a tribunal

• You will be sent form ET3. This asks whether you intend to contest the complaint and if so, what your grounds are.
• Return the completed form within 28 days, otherwise you may lose your right to take part in the tribunal hearing.

You need to be able to justify your actions when facing an employment tribunal

• Most experienced HR managers will not need support.
• You may want to involve a solicitor (or personnel consultant) who specialises in employment law if you are unsure of your ground, as the outcome could have major implications for your business.

Note

Employment law is complex and is changing rapidly. This factsheet reflects our understanding of the basic legal position as known at the last update. Obtain legal advice on your own specific circumstances and check whether any relevant rules have changed.

Expert quote

"Dismissing an employee is a last resort. When you must do it, be professional. Explain quickly and clearly, but with compassion, and give details of any help you have available." - Frank Thaxton, Thames Valley Partners business advisers