Best Practice tips: Notice periods

All employment contracts will have either express or implied notice periods so that they can be ended by either party giving the appropriate notice to terminate them. Usually the amount of notice required will be set out specifically in the employment contract (as this is required by the Employment Rights Act), however, if the details are missing, then the legislation also provides minimum periods. 

So how well do you understand the notice requirements? We have set out below the key points to understand to help avoid disputes about notice pay and notice periods: 

Statutory minimum notice period

The Employment Rights Act 1996 Employment Rights Act 1996 (s86) provides the minimum notice periods that employees are required to receive if the employer wishes to terminate the contract. The amount required depends on the employee’s length of service (and the contract can give more but not less than these durations) as follows: 

• Less than 1 month’s service: No notice required.
• 1 month – 2 years’ service: 1 weeks’ notice.
• 2 years or more: 1 week per year of service, up to a maximum of 12 weeks after 12 years.

Employees on the other hand are only required to give 1 weeks’ notice after one month of service, unless their employment contract applies a longer contractual notice periods. 

Notice pay during sickness absence

Employees under statutory minimum notice periods receive full pay during their notice period, even if they are off sick. However, where longer contractual notice periods apply, then sick pay terms (e.g., SSP or company sick pay) would apply.

Fixed-term contracts

Fixed-term contracts end on a specified date or event. If terminated early, notice provisions (such as break clauses) in the contract will apply.

Contractual notice and termination

Employment contracts should be clear on the details of notice periods, including:

• The length of notice required for both parties.
• Any rights to pay in lieu of notice (PILON) where the employee is not required to continue to work during notice and is leaving immediately; 
• Garden leave provisions which allow the employer to require the employee not to work but still employed during notice (see below). 
• Termination without notice for incidents of gross misconduct.

Pay in lieu of notice (PILON) clauses

PILON clause should state that payment in lieu is simply an option available to the employer, rather than right for the employee. It should specify what is included in the payment (for example, whether basic salary only is payable or whether other benefits will also be paid in lieu). If no PILON clause exists, such payments will be a technical breach of contract and will need to include a sum equivalent to contractual benefits and other payments such as bonus as well as basic pay. 

Garden leave

Garden leave allows the retention of employees on payroll but away from work during their notice period, ensuring control over their activities by stopping them working for anyone else and therefore preserving business interests. A contractual clause is essential to be able to do this lawfully.

Dismissal without notice

Employees who are found to have committed gross misconduct following a fair disciplinary process may be dismissed immediately and without notice. The employee’s conduct must be in fundamental breach of contract, such as theft or dishonesty. 

Communicating notice

When notice is served, it should be clearly communicated with confirmation of the last date of employment. It should also be in writing and the best practice is to use email to limit disputes.  In fact, often the contract of employment will specify how the notice should be given and this should be considered beforehand. 

Legal claims and underpayments

Failing to pay notice correctly may lead to claims for wrongful dismissal or unlawful deductions from wages. Employees can seek damages for these financial losses through the employment tribunals or civil courts, depending on the claim’s value and complexity.

Special cases

In rare instances, courts may prevent employers giving notice to terminate contracts where it would cause significant harm to the employee, such as loss of key benefits (as happened previously in Aspden v Webbs Poultry, where an employer was prevented from giving notice which would have removed an employee’s entitlement to permanent health insurance).

If you need help with any of these issues, please contact us – 01635 896336. 

This article is a summary of issues and we recommend taking legal advice before taking any formal action.