A key provision of all employment relationships is the entitlement of the employee and employer to notice of termination from each other. Whilst in most cases notice is a straight forward issue, it can become complicated and cause issues for both employees and employers.
Statutory Minimum Notice
Whilst most modern employment contracts will deal specifically with notice of termination (see below) the Employment Rights Act 1996 (section 86) provides for minimum notice to be given by an employer in the absence of a specific agreement.
In the absence of a contractual notice provision (and in any event, as an absolute minimum) employers must give the following periods of notice, determined according to length of service:
More than one month but less than two years – one week notice
More than two years but less than 12 years – one week notice for each complete year of service (up to a maximum of 12 weeks
More than 12 years – 12 week notice
Notice of termination should be dealt with in the employment contract and may simply replicate the statutory minimum periods given above (commonly the case for junior staff members or new starters).
Alternatively, many employers expect to give a standard one months’ notice of termination (usually following the successful completion of probation) which may increase to three months for more senior staff and further increase to six or 12 months for senior management and key staff.
Payment in lieu of notice “PILON”
Whilst notice of termination may be given to an employee and they are expected to work throughout that period, a tool commonly used by employers is the entitlement to pay notice in lieu of it being worked.
In practice, the employment is terminated immediately with the employee being paid their usual salary for the equivalent period of notice they would have been entitled to have received. A PILON allows for the employment to be ended quickly and a line drawn which may suit either or both the employer and employee depending upon the circumstances of the termination of the relationship.
Employers should be careful when seeking to terminate employment relationships using a PILON as there must be a specific clause in the employment contract to allow for such use.
When does notice not have to be given or paid?
Ordinarily and in most cases notice of termination will need to be given or paid by an employer but there are two common exceptions:
1. Where the employee is being dismissed for gross misconduct, and
2. Where the employee has given notice to terminate their employment and leaves without working their notice.