Topic overview

Dismissals and redundancies

Dismissals and redundancies

Dismissing employees or making them redundant can be difficult at the best of times. But it gets worse if you are taken to an employment tribunal to face a claim of unfair or wrongful dismissal. Following the right procedures helps protect your business and minimise the risk of a legal dispute.

Unfair dismissal

Employees with two years' continuous service who are sacked without a fair reason and reasonable treatment can claim unfair dismissal. Fair grounds for dismissal include the conduct of the employee, their ability or qualifications, and redundancy. You must follow a fair and reasonable dismissal procedure. Employees adopting employee-shareholder status do not benefit from "ordinary" unfair dismissal protection.

A dismissal is automatically unfair if it is for one of a number of prescribed reasons, including whistleblowing (also known as protected disclosure), health and safety activities or illegal discrimination. This applies to all workers, no matter how short their period of employment.

An employee who has been unfairly dismissed can ask the employment tribunal to order re-employment or award compensation for unfair dismissal. The basic award is £17,130 (depending on age and length of service) and compensation for financial loss is capped up to a maximum of either £93,878 or one year's gross pay and the fees which must be paid when an employment tribunal case is presented - whichever is the lower. Compensation can be unlimited if the employee has suffered from illegal discrimination.

If you are making several employees redundant at the same time, you should make sure you follow the correct procedures for small scale redundancies so that you stay on the right side of the law.

You should always seek professional advice before dismissing any employee with sufficient service to make an unfair dismissal claim a possibility.

Wrongful dismissal

If an employee's contract of employment does not specify a notice period, they are entitled to a reasonable period of notice if you dismiss them. In any case, the employee is entitled to at least the statutory minimum notice period of one week after one month's employment. After this, entitlement increases at the rate of one extra week per year, to a maximum of 12 weeks after 12 years' employment.

If you dismiss an employee without the right notice, this is wrongful dismissal. The employee is usually entitled to compensation equal to their normal remuneration (both salary and benefits) during the notice period. There are exceptions, for example if the employee is dismissed for gross misconduct that justified immediate dismissal.

Constructive dismissal

If an employer breaches the contract in a way that goes to the root of the contract, the employee may resign immediately and claim constructive dismissal. For example, an employee can claim constructive dismissal if you reduce their pay without agreement, or tell the employee to resign.


Employees who are made redundant are not entitled to claim redundancy pay until they have over two years' service. Tax is not payable in respect of statutory redundancy pay.

Avoid claims that a redundancy is unfair dismissal by ensuring that it is genuine. In general terms this means that the job must have disappeared. Also, the employer must select employees for redundancy on a fair and objective basis, after reasonable consultation and with adequate notice and a fair appeals procedure.

Settlement agreements

A settlement agreement is a legally binding confidential agreement between an employer and employee. Under a settlement agreement, a compensation payment is typically given to the employee by the employer. In return, the employee agrees to waive their employment rights and not to pursue any employment tribunal claims arising from their employment or its termination.

Settlement agreements can offer employers a quick method of terminating employment, avoiding what otherwise might be a long and difficult process. They are widely used when terminating employment following a disciplinary process, or following long-term sick leave, to avoid the risk of a claim against the employer.

Common reasons for dismissal


1. Poor time-keeping

Poor time-keeping is likely to constitute either a performance or a misconduct issue, and both are potentially fair reasons for dismissal. But you must still apply a fair procedure, starting with establishing the reason for the lateness. The procedure might also include regular appraisals (with time-keeping issues being addressed), giving early warnings, providing the employee with a timescale for improvement, and obtaining medical evidence if there is any risk that the problem has a medical cause. If there is a genuine reason for poor time-keeping, such as a disability, you may be obliged to make 'reasonable adjustments' to accommodate the employee.

2. Poor performance

Poor performance is one of the potentially fair reasons for dismissal. However, to demonstrate that you have behaved in a fair and reasonable manner you may have to show you conducted regular appraisals (to identify weaknesses and the reasons why the employee is struggling, at an early stage), issued early warnings with a set time to improve, set realistic targets, and if necessary offered training and/or supervision to address problem areas.

3. Lack of qualifications or experience

If you can prove that the employee has knowingly misstated details about their qualifications or experience, this would be likely to count as 'some other substantial reason' to justify dismissal.

If, however, the qualifications are desirable rather than necessary, and particularly if the employee has been doing the job satisfactorily without them, it may be unfair to dismiss. So, if you want and need an employee to have qualifications and/or a certain type of experience, make your job offer conditional on them, and check up on them before you confirm the employment.

As in any other disciplinary case, you need to ensure that you observe any written disciplinary procedures that you have, and that, in any event, the procedures follow the Acas Code of Practice or you risk an uplift of up to 25% in any award made against you in an Employment Tribunal.

4. They refuse to wear appropriate clothing

If the employee is representing the company in dealings with customers or suppliers, or appropriate clothing is required for health and safety reasons (for example by the need for hair coverings in places where food is prepared), you can potentially dismiss them, depending on the seriousness of the breach. If they are working behind the scenes, dismissal would be far riskier.

Beware of being discriminatory on the grounds of sex (for example by requiring men to wear a shirt and tie while allowing women to wear casual T-shirts), or on the grounds of race, ethnic origin or religion (for example, by requiring formal business dress and refusing to allow employees to dress according to their race, ethnic origin or religion).

5. Long-term sickness

Incapability is one of the potentially fair reasons for dismissal. But first, you need to consider whether the employee's ill health amounts to a disability under the law. A disability is one that lasts, or is likely to last, longer than a year - and has a more-than-trivial effect on normal day-to-day activities.

If the employee is disabled, you must either be able to show that:

  • your treatment of the employee was for reasons unconnected to their disability
  • was not on the grounds of disability
  • that such treatment was justified in that it was a proportionate means of achieving a legitimate aim

You also need to show that the reason for the dismissal cannot be removed by a 'reasonable adjustment' to the employee's working conditions. Otherwise it is discrimination.

Either way, as part of any process which will help them return to work, an Occupational Health report should be obtained and its recommendations should be followed. You should also check with the employee what they think would assist them in returning to work.

If you neither knew about the disability nor ought reasonably to have known about it, it is not discrimination.

If the employee is not disabled, but suffers from long-term ill health, an Employment Tribunal would certainly expect you to do everything you can to keep your employee on, including an offer of alternative employment. However, if - after consultation with the employee and a medical investigation - there is no prospect of them returning to work in any role, and you cannot keep the position open indefinitely (and can prove this to be the case), you may be able to dismiss on the grounds of 'incapability'.

To avoid a successful claim for unfair dismissal, you must be able to show that you acted reasonably in treating the absence as a reason to dismiss, and that you acted fairly before dismissing. Take legal advice before you do anything.

6. They've been sentenced to a prison term

Be careful. Great care should be exercised, and legal advice should be sought. The fact that the employee is in prison and therefore cannot do their job is not in itself enough: it may 'frustrate' the contract, but as a general rule Employment Tribunals are reluctant to decide that the contract of employment has ended just because of the employee's inability to perform it.

If, however, the employee's offence was related to their work, a dismissal may be fair on grounds of conduct. Alternatively, the circumstances of the imprisonment might be such as to reflect adversely on the image of your business, and/or destroy trust and confidence in the employee, which might count as 'some other substantial reason' for dismissal.

You should still carry out such investigations as are reasonable in the circumstances before making any decision to dismiss. Such investigations must be carried out promptly to ensure that any dismissal is fair.

7. An employee is pregnant

You cannot sack employees for being pregnant. In theory at least, the fact that an employee is pregnant should not stop you from sacking her for one of the five fair reasons as long as it is not in any way influenced by the pregnancy. But be very careful. You need to be very certain that her behaviour cannot be attributed to the pregnancy (which might, for example, be a cause of poor time-keeping - because of morning sickness - or absenteeism). You should conduct a thorough investigation and ascertain the facts before taking any action against her. Take advice.

Reviewed by Michael Scutt, head of employment, Crane & Staples Solicitors

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