Termination of employment is a very common procedure for most companies. Read on to find out how it works in case you, as an HR professional or an employer, ever have to handle it.
As businesses grow, HR departments continuously update company policies related to upskilling existing talent. However, in some cases, certain employees may no longer be a good fit for the company. Likewise, employees may find new opportunities that are better suited to their needs and preferences. And this is where termination of employment begins.
- What Is Termination Of Employment?
- Types of Termination Of Employment Contract
- Minimum Notice Period For Termination Of Employment
- How to Write a Termination of Employment Letter
- ✅ Easily Manage Employee Contracts With Factorial’s HR Software: Free 14-Day Trial Period
What is Termination Of Employment?
Termination of employment happens when the contract between an employer and an employee is officially ended and is done in writing.
The term “termination of employment” is often (and incorrectly) used as a synonym of ‘dismissal’. The truth is that under UK employment law, termination of employment can be carried out at either the employer or the employees’ will. Therefore, either party can initiate the procedure.
Whether “employment” is ended at the employer or the employee’s request, there are many reasons for the termination of an employment contract.
Types of Termination Of An Employment Contract
As stated above, there are many reasons for an employment contract to be ended and each reason has its own rules and regulations.
The different types of termination of employment contracts can usually be categorised as involuntary or voluntary. The former happens when the employer ends the contract, while the latter is used in cases where the employee chooses to leave the company.
The different types of termination of employment contracts are:
Dismissal
This is when the employer ends the contract. It can be due to business needs or the employee’s misconduct. In any case, employers must provide valid reasons that can be justified.
Redundancy
Redundancy happens when there is a need to reduce the workforce. It is a form of dismissal without cause.
Employers should conduct a selection process to decide on whose contracts will be ended in a fair way. Alternatively, they can provide a redundancy package and allow staff to choose voluntary redundancy.
Not sure what the difference between severance and redundancy pay is? Find out here.
Resignation
Resignation is one of the most common types of employment contract termination. It refers to a situation when an employee decides to leave their job to either join a new company or simply stop working.
Retirement
Due to a change to the law in 2011, employers can no longer force employees to retire at any age. Employees must now give notice of their wish for the contract to end and keep working during the notice period in order to allow the company to find a suitable replacement.
Employees may also choose full or part-retirement. When opting for part-retirement, they are entitled to a percentage of their pension pot and reduce their weekly working days. However, this does depend on the employer, as the business may not be able to take on a part-time employee.
End of a Fixed-term Contract
Fixed-term contracts usually end at a previously established and agreed-upon date. However, if an employee provides services for two years or more, the termination of the contract must be treated as a dismissal. That is as if there were no end date to the contract.
As with any dismissal, the employer will have to prove there’s a fair reason for the contract not to be renewed. In addition, employers must know how to end the employment contract correctly. If the employee continues to work after the contract end date, it is automatically implied that the employer agrees to it.
Minimum Notice Period For Termination Of Employment
Under UK employment law, both the employer and the employee are entitled to a notice of termination of employment.
The notice period is usually depicted on the contract of employment, but there is a statutory minimum notice period to take into account:
- One week – for employees having worked at the company between one month and two years.
- One week for each year worked – for employees having worked at the company between two and twelve years.
- Twelve weeks – for employees having worked at the company for twelve years or more.
Learn more about notice periods.
How to Write a Termination of Employment Letter
A termination of employment letter is a formal document that notifies other parties of the end of an employment contract.
An employer’s notice of termination letter can be tough to write. It’s easy to just say the wrong thing – something any employer would want to avoid when letting go of valued employees. However, it is also extremely important for you to write one. It will not only provide your employees with all the information they need and, but also, provide valuable records for the company.
These are some items to include that will make sure you convey all correct information:
- Reasons for terminating the contract.
- The date the contract will end.
- Details of final pay and compensation for unused holidays.
- Arrangements regarding devices or any properties of the company that the employee must return.
Termination of employment doesn’t have to turn into a burdensome task for people management within your company. Once you know the law and have appropriate tools to manage the process, you’ll be able to take care of it just like any other daily task.
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