How to manage termination of employment in a fair and tactful way

When someone is let go of a small business, the effect is felt throughout the company.

Terminations of employment can be a messy and emotionally charged affair at the best of times. Small businesses frequently lack the legal expertise to understand the intricacies of different termination types. They also often lack clear termination policies, which can lead to confusion and legal trouble as the employee is let go.

It’s not like at a big corporation where there are dozens of people in-house to replace whoever left. Small businesses can find themselves scrambling to fill key roles if the termination doesn’t come at a good time.

I hope to empower you as a small business owner with the know-how to make it through difficult situations like termination of employment, in a way that’s legally compliant and fair to all and sundry.

I’ll cover the different types of termination of employment, the UK employment laws that relate to termination, and how you can navigate termination as a small business owner.

Defining termination of employment

Termination of employment marks the end of your employee’s contract or agreement with you and your organisation.

There are two main types of termination of employment: voluntary and involuntary.

Voluntary termination includes situations like resignation, retirement, and fixed-term contracts when the employee leaves of their own accord or because the pre-determined length of the working relationship has concluded.

Involuntary termination includes things like dismissal or redundancy, where the decision is made by the employer. Often, this is due to poor performance or because the employee has broken a company rule.

I’ll get more into these different types and situations later on.

Legal framework for termination in the UK

There are two main laws you’ll need to be aware of as a small business owner when dismissing staff in the UK.

One of these is the Employment Rights Act 1996, which sets out employees' rights and employers' responsibilities in matters of termination. It covers unfair dismissal, redundancy rights and notice periods.

The other is the Advisory, Conciliation and Arbitration Service (ACAS) Code of Practice, which guides the handling of disciplinary and grievance procedures. While it isn’t legally binding, it sets a standard to follow for dealing with termination.

There are a few key points in both of these laws and guidelines you should keep in mind:

1. Fair reasons for dismissal: The Employment Rights Act spells out fair reasons for dismissal like performance, conduct, redundancy, or breach of statutory duty. You need to make sure any termination aligns with these reasons
2. Notice periods: Both the Employment Rights Act and the ACAS give minimum notice periods for termination. You must adhere to these minimum periods, but you can give longer notice periods if you choose
3. Redundancy and consultation: As an employer, you must follow a fair selection process for redundancy in such a way that it’s handled fairly and transparently
4. Record keeping and documentation: Maintain clear records of termination processes and steps taken during the process. This will be important in case of a legal dispute

Types of termination of employment

There are a few different types of termination, both voluntary and involuntary, and the nuances between each can be lost on people without HR expertise.

The lead-up to the employee’s notice period and termination doesn’t have to end in hurt feelings and disappointment, it can set a precedent for being in good standing between you and the employee who’s leaving.

Voluntary termination: resignation

Resignation is a common form of termination where the employee leaves of their own accord, through no fault of either you or the employee.

Here’s how it typically happens:

1. Initiation of resignation: The employee submits a formal written notice of their intent to leave the company
2. Notice period: How much notice the employee needs to give depends on their tenure. One week is standard if the employee is within their termination period, one month if they’re a tenured employee. You need to have the notice period clearly stated in your employment contract.
3. Formal meeting: It’s customary for you or the employee’s line manager to sit down and have a discussion about their reasons for leaving, and any feedback the employee may have
4. Confirmation email: After the meeting, the employee should send a confirmation email to their manager, with their talent manager CC’d, confirming their resignation and last working day
5. Smooth transition and knowledge transfer: The employee should take steps to transfer their knowledge to their team members and leave their responsibilities in good hands. This minimises the disruption caused by them leaving and helps maintain positive relationships

Involuntary termination: dismissal

Involuntary dismissal is a tad more complicated for small business owners and HR leaders. It’s important first of all to distinguish between fair and unfair dismissal.

• Fair dismissal: This usually happens in response to employee misconduct, their inability to perform their job duties, or other valid reasons
• Unfair dismissal: This is when you dismiss the employee for unreasonable causes. That includes protected actions like whistle-blowing or discrimination based on age, gender, or race

If you’re considering dismissing an employee, and want to avoid unfair dismissal claims, you may find getting professional support really helpful. You can get a dedicated and qualified HR advisor to guide you through the termination process, to ensure you do everything by the book. Want to find out more? Book in a call with us:

You want to keep the dismissal process fair whenever possible. Here are the steps you can take to do that:

1. Documenting issues: Keep a detailed record of any performance issues on the part of the employee
2. Formal meetings: Arrange formal meetings to discuss any concerns or repeat violations of company rules. These meetings should be held with transparency and respect, and give the employee a chance to defend themselves
3. Written notice of dismissal: If dismissal is deemed necessary, state their notice period (find out more about written warnings before dismissals here)and any pay they are entitled to based on their length of service

Redundancy

Employee redundancy is when employment is terminated due to workforce reduction, like if your business closes or you have to relocate your workplace.

You can read a more detailed guide on the redundancy process and on how to make a fair and transparent employee redundancy selection process here.

Constructive dismissal

This is when an employee resigns due to an employer’s breach of contract. You can avoid these situations by creating a positive work environment, receiving regular employee feedback, and addressing any issues promptly.

Retirement and fixed-term contracts

No one wants to work forever. No matter how long they stay with you, at some point your employees are going to age out of the workforce. None of us are getting any younger, after all.

Discuss any retirement plans with the employee, including any arrangements for their transition and their final working day.

Fixed-term contracts are when the agreed-upon length of employment has come to an end. Before that happens, include in their contracts the process for providing notice, and include any discussions for contract renewal or conversion to permanent employment status.

Charlie’s approach to termination

I’d like to hold up Charlie as a good example to follow when it comes to handling termination of employment in the UK.

You can have a look at the resignation process at Charlie and its main steps here below:

Here’s a few tips on best practice when it comes to handling resignations, based on our own experience:

1. Clear communication and ongoing support

At Charlie, we emphasise clear communication from the start of the termination process. That includes direct conversations between the employee and their direct manager at Charlie.

During the termination process, Charlie makes sure both the employee and their remaining team members have adequate support and guidance.

2. Using HR software for documentation

The Operations team at Charlie sends an employee offboarding checklist using Charlie’s HR software for the manager. The checklist includes steps like returning company property, finalising payroll, and having exit interviews.

Any employee records about the termination are kept using the Charlie document storage feature.

3. Maintaining compliance and employee morale

Two weeks before the employee’s last day, the Charlie operations team reaches out to the employee to start organising offboarding. Special attention is also given to the remaining team members about the termination and the company’s future.

Leave things on the right foot with Charlie

Employment termination is a delicate process that needs careful handling. It’s not just for legal compliance, but for maintaining a positive workplace culture.

If you need some extra support in executing your employee termination processes, you may find our HR platform helpful:

• Store all your employee data in one, secure location to comply with UK law
• Build and assign digital offboarding checklists to ensure all tasks are on track 
• Get helpful insights on your retention and turnover rates

Want to see if for yourself? Start a free trial now!