The issue here is about risk and reputation. Generally employees need to have worked for an employer for 2 years before they are able to bring a complaint of unfair dismissal but there are certain exceptions to this where employees do not need any minimum period of service to bring a claim. In addition, if an employee establishes that their dismissal is for one of these reasons it will be treated as being automatically unfair. In other words, the employer will not have the option of being able to argue that the dismissal is potentially fair.
There are a surprisingly high number of reasons that are treated as automatically unfair in the context of a dismissal. For example, if your employee announces she is pregnant and you decide to dismiss her because she will be taking a period of maternity leave that will cause disruption to your business, that will be treated as an unfair dismissal and pregnancy discrimination. Similarly, if you dismiss your employee for having made a protected disclosure under the whistleblowing provisions, s/he will be able to claim automatic unfair dismissal even if they have only been employed for a month!
There are other less obvious examples. If you dismiss an employee who refuses to sign an opt out from the restrictions imposed on working for more than 48 hours per week under the Working Time Regulations, or for taking action against you to receive the correct amount of pay under the National Minimum Wage Regulations, these will be treated as automatically unfair dismissals, irrespective of how long they have worked for you.
If you dismiss someone for a reason relating to their age, sexuality, race or religion, because they have a disability or are pregnant (or for any other legally protected reason) they will be able to claim discrimination and do not need to show any minimum period of employment.
If you make a mistake and dismiss an employee for an automatically unfair reason or the dismissal is discriminatory, s/he can, in some cases, receive a higher amount of compensation than is available in ordinary unfair dismissal cases.
Compensation for unfair dismissal claims is made up of a basic award and a separate compensation award to reflect the losses the individual has incurred (such as loss of salary, pension and other allowances or benefits). The compensatory award is usually subject to a cap – calculated on the basis of the lower of either 12 months’ gross salary or £80,541 (at current rates).
The amount of the basic award is usually determined by reference to the individual’s length of service and is calculated in the same way as a statutory redundancy payment. However, some automatically unfair dismissals attract minimum amounts in respect of the basic award. For example, if you dismiss someone because they have acted as an employee representative during a collective redundancy process, s/he will be entitled to receive a minimum amount of £5,970 (at the current rates).
The cap on the compensation award does not apply where the dismissal is for one of the following automatically unfair dismissals, namely: health and safety, whistleblowing or selection for redundancy on because of these reasons and awards can be significant.
In addition, discrimination claims are not capped and also attract additional awards for injury to feelings which compensate an individual for the upset and distress caused.
It is also worth mentioning that if you dismiss an employee shortly before they acquire two years’ service (in the hope that you can avoid a claim of unfair dismissal), s/he may still be able to bring an ordinary unfair dismissal claim against you. This is because the law requires employers to give at least 1 week’s notice per complete year worked if they dismiss an employee. So if you dismiss the employee without notice after they have worked for you for 1 year and 51 weeks’ they will be deemed to have two years’ service at the time of their dismissal.
Finally, it is worth reiterating that it is generally not time consuming or difficult to dismiss employees fairly and it better to be safe than sorry. [Reference other myth busters].