At a glance: termination of employment in United Kingdom

Termination of employment

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

Contractually, at common law, an employer can dismiss an employee for any reason, provided appropriate notice is given.

Statutorily, if the employee has the relevant qualifying length of service (if applicable), he or she may be dismissed only for a potentially ‘fair reason’, that is:

• capability;
• conduct;
• redundancy;
• breach of a statutory enactment by the employee; or
• some other substantial reason.

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

Notice of at least the statutorily prescribed minimum must be given prior to dismissal, as follows.

UK employers provide additional notice as a matter of custom in the employment contract. Where this is the case, the contractual notice must be given by the employer. Payment in lieu of notice can be given if set out in the employment contract.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

This may occur only in cases of gross misconduct (ie, misconduct of a very serious nature including that which the employer is justified in treating as very serious in the context of its business). It is important that a non-exhaustive list of examples of gross misconduct be set out by the employer and relayed to each employee. The list is usually contained in the employment contract.

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

Under the Employment Rights Act 1996, statutory redundancy pay exists for employees with two or more years’ service. The exact amount is linked to the length of service, the age of the employee and the statutory cap on ‘weekly pay’.

Redundancy pay may be enhanced by the employer, including by custom and practice.

Are there any procedural requirements for dismissing an employee?

Yes, there is a duty for an employer to act ‘reasonably’ pursuant to the Employment Rights Act 1996 for a potentially fair reason if it is dismissing an employee with at least two years' continuous service. 

Employers carrying out dismissals (except for dismissals on the grounds of redundancy or the non-renewal of a fixed-term contract) should also follow the principles set out in the Code of Practice of the Advisory, Conciliation and Arbitration Service (ACAS) (a government public body). A failure to follow the ACAS Code does not in itself make an employer liable to a claim; however, employment tribunals will take the ACAS Code into account when considering relevant cases and can adjust any awards they make by up to 25 per cent for unreasonable failure by an employer to follow the ACAS Code.

Prior approval by the UK government is not required by law; however, if the employer proposes to make redundancies affecting 20 or more employees within a particular time frame, it must notify the Department for Business, Innovation and Skills (BIS). Collective consultation with representatives of the affected employees is also required.

In what circumstances are employees protected from dismissal?

Ordinarily, employees with two years’ service have general statutory protection from unfair dismissal.

The following categories have automatic unfair dismissal protection but require two years’ service:

• dismissal owing to a ‘spent’ conviction; and
• dismissal in the context of a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (together, TUPE).

Dismissals in the following contexts have automatic unfair dismissal protection and do not require any qualifying length of service:

• jury service;
• leave for family reasons and related leave for time off for dependants;
• health and safety activities;
• Sunday working;
• asserting certain statutory rights;
• asserting rights under the Working Time Regulations 1998;
• employee trustees of occupational pension schemes;
• employee consultation representatives or candidates (including European and domestic works councils);
• whistle-blowers;
• flexible working requests;
• certain discrimination-related dismissals;
• exercising the right to be accompanied at disciplinary or grievance hearings;
• the rights of part-time workers;
• the rights of fixed-term employees;
• in connection with entitlement to a national minimum wage;
• in connection with entitlement to working tax credits;
• in connection with the right to request study and training; and
• trade union membership or activities or official industrial action.

Dismissal is automatically unfair if it is by reason of a protected activity; that is, it is causally connected.

Dismissals can also attract protection under anti-discrimination legislation.

Are there special rules for mass terminations or collective dismissals?

Yes, a special information and consultation regime applies where there are 20 or more affected employees who are proposed to be dismissed for a ‘non-fault’ reason within a particular time frame. ‘Protective awards’ exist of up to 90 days’ pay per affected employee for the employer’s failure to consult. This is governed by the Trade Union and Labour Relations (Consolidation) Act 1992, section 188.

In addition, if the employer proposes to make redundancies affecting 20 or more employees within a particular time frame, it must notify the Department for Business, Innovation and Skills (BIS). Collective consultation with representatives of the affected employees is also required.

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

There is no direct equivalent to the US class action in the United Kingdom. However, there are procedural means of dealing with group actions of multiparty claims that allow groups of claimants to link the claims to proceed against a single defendant, as follows:

• where more than one person has the ‘same interest’ in a claim, the claim may be begun or the court may order that one or more claimants, or one or more defendants, may bring or defend the claim representing others who have the same interest in the claim. Any judgment will be binding on all individuals represented unless the court directs otherwise; and
• where claims by a number of individuals give rise to common or related issues of fact or law, a court may make a group litigation order to manage the claims. Judgments, orders and directions of the court will be binding on all claims within the group litigation order.

In the context of collective consultation and TUPE, an employee representative brings the claim for a failure to inform and consult and failure to consult on a collective basis on behalf of the affected employees. If successful, compensation is awarded to each affected employee.

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

Any age-related compulsory retirement must be justified under anti-age discrimination legislation (the Equality Act 2010) and must be fair under unfair dismissal legislation (the Employment Rights Act 1996). Compulsory retirement on medical grounds also has the potential to raise discrimination (principally, disability and age discrimination) and unfair dismissal issues.