As an employer, sometimes it is necessary to terminate an employee’s contract of employment. This can be for several reasons including redundancy, poor performance or breach of contract.
As an employee, it is also possible to end your contract of employment early. Whether you are an employer or an employee there are a few things you need to keep in mind when terminating a contract of employment.
As professional employment law specialists here at Robertsons Solicitors in Cardiff, we can help you with any questions you may have about terminating a contract of employment. In the meantime, join our experts in this article to find out more.
An employee can terminate an employee’s contract for various reasons such as unsatisfactory performance, redundancy or misconduct. An employee is also able to terminate a contract without notice for breach of contract or by resigning due to constructive dismissal.
Speak to a solicitor for more advice on terminating a contract as an employer or employee.
What is a contract of employment?
A contract of employment is an agreement between an employee and an employer. It sets out the rights and responsibilities of both parties. A contract of employment is usually made up of two parts: the written contract of employment and the implied terms.
- Written contract: The written contract of employment is the document that sets out the express terms of the agreement between the employer and employee. This will include things like job title, salary, hours of work, holiday entitlement, and notice period.
- Implied contract: The implied terms are those that are not expressly stated in the contract, but which are understood to be part of the agreement. These might include things like the duty of mutual trust and confidence, or the duty to take reasonable care of your health and safety at work.
In the UK, most contracts of employment will be governed by employment law.
This means that there are certain minimum rights that you as an employee are entitled to, regardless of what is stated in your contract.
For example, you have the right to receive the national minimum wage, to paid holiday, and to not be discriminated against at work.
You may wish to terminate your contract of employment for many reasons. Perhaps you have found another job and so will be leaving your current employer. Or maybe you are unhappy with your current working conditions and would like to leave.
Whatever the reason, there are a few things that you should bear in mind when terminating a contract of employment in the UK.
Fixed term contract
If you wish to terminate a contract as an employee on a fixed-term contract, then you will usually only be able to terminate this type of contract if there is a clause in the contract which allows you to do so.
Otherwise, you will be expected to work out your notice period or complete the contract.
If you have a permanent contract, then you are usually able to terminate this by giving your employer notice.
The amount of notice that you need to give will be specified in your contract of employment.
If you do not have a contract, or your contract does not specify the amount of notice, then you will need to give at least one week’s notice. However, if you’ve been in your job for less than a month, you don’t have to give notice.
An employer has breached the terms of a contract
You may also be able to terminate your contract immediately if your employer has breached the contract. For example, if they have not paid you or if they have treated you so badly that you cannot stay in employment.
What should be included in a contract of employment?
Every contract of employment should include:
- The names of the employer and employee
- The date when the contract starts
- A job title or description
- The employee’s place of work
- The salary or wage
- How often the salary or wage will be paid
- Hours of work
- Holiday entitlement and other benefits
Most common reasons for terminating a contract of employment
Here’s our list of some of the most common reasons for an employer to terminate a contract
This is usually the main reason why employers choose to terminate a contract of employment.
If an employee is not meeting the required standards or job expectations, then the employer may decide to let them go.
This is usually after a period of warning and/or probation, where the employee has failed to improve.
This could be due to things like poor attendance, lateness, or not meeting targets.
if an employer needs to reduce their workforce due to economic reasons or when a role is no longer needed, then they may choose to make some employees redundant.
This could be because of a downturn in business, or the introduction of new technology that means fewer staff are needed.
This usually happens when there is a reorganisation or downsizing at the company, and employees are selected for redundancy based on skill set, experience and length of service.
This usually involves a selection process, and employees with the least time at the company or in their role are usually selected first.
Breach of a contract
If an employee breaches the terms of their contract, then the employer may choose to terminate the contract.
Some breaches of contract included not following company policies, refusing to work the required hours, being absent without leave, or even committing a crime.
This would usually only happen after repeated warnings.
If an employee has committed an act of misconduct, then the employer may choose to terminate their contract of employment.
This could be for something like theft, violence, or gross misconduct.
Gross misconduct can include things like bringing the company into disrepute, fraud, or breaching data protection laws.
Contracts of employment will have an age limit, after which the employer is entitled to terminate the contract.
The retirement age is usually 65, but this can vary depending on the industry and job role.
For example, airline pilots must retire at 60.
Employees can choose to terminate their employment contract by resigning from their role.
This must be done by the notice period specified in the contract, and usually requires at least two weeks’ notice.
Terminating a contract in the UK as an employee
- How much notice you are required to give: Your contract of employment will state how much notice you are required to give if you wish to terminate your contract.
- Whether you are on a probationary period: If you are on a probationary period, your employer may be able to terminate your contract without notice.
- Whether you have any contractual rights to early termination: Some contracts of employment will give employees the right to terminate their contract early, usually due to redundancy or a change in circumstances.
- The consequences of terminating your contract: You should be aware of any financial or legal implications of terminating your contract, such as having to pay a penalty fee.
- How to give notice: You will need to give notice in writing, either by letter or email and include the date on which you wish your contract to be terminated.
- How to end your contract early as an employee: If you have a contractual right to early termination, you can usually do so by giving written notice to your employer.
Terminating an employment contract as an employer
When terminating an employment contract as an employer, you should:
- Check the contract: You will need to check the employee’s contract of employment to see if there are any notice periods or other conditions that must be met before termination.
- Consider the reasons for termination: You should have a valid reason for terminating the contract, such as conduct or performance issues, or a breach of contract.
- Follow any internal procedures: if your organisation has internal procedures for terminating contracts, you will need to follow these.
- Give notice: You will need to give the employee the required amount of notice, as set out in their contract or by law.
- Hold a meeting: You will need to hold a meeting with the employee to discuss the termination and give them their notice in writing.
- Exit interview: It is good practice to conduct an exit interview with the employee, to find out any feedback they may have about their time with the organisation.
- Pay instead of notice: If the employee does not want to work their notice period, you may be able to pay them in lieu of notice.
- Final pay: You will need to make sure that the employee is paid any outstanding wages, holiday pay, and other entitlements
- Return of company property: You will need to collect any company property from the employee, such as laptops, mobile phones, and uniforms.
- Contractual obligations: You will need to check the contract of employment to see if any other obligations need to be met, such as returning a company car or handing in keys to the office.
If you are an employer who needs to end a contract of employment early or an employee who wants to bring their contract to an end, our experienced employment solicitors will be able to advise you on the best course of action.
Get in touch with one of our helpful team members today for more advice and support. We understand that employment law can be complex, but we can help you navigate the process and ensure that your rights are protected.