Members' Area: Leavers
A leaver generates a number of administrative tasks and it is easy for some of them to be overlooked, resulting in overpayments or other complications. A good way of making sure you tie up loose ends is to devise a simple check list, so that you can tick off such items as:
- Notifying and instructing payroll
- The return of company property/company car
- The repayment of company loans or expense “floats”
- Notifying pensions and benefit providers
- Issuing a P45
Under the provisions of the Data Protection Act 1998, if you give a reference about one of your employees in confidence to another employer, the employee concerned will not be entitled to access to the information. Where you hold on file a confidential reference about one of your employees, which has been given by a previous employer, you can refuse to give the employee concerned access to the reference, without the author’s consent. If permission is refused, the employer has to decide whether the benefit of disclosure outweighs the duty of confidentiality. Where oral references are given, the referee is less likely to make the reference confidential. There is also no control over any written notes that the recipient may make. If such notes are put on file and the employee asks for access, the employer will not be able to refuse on the grounds of confidentiality.
- Dismissal referencesOpen
An employer must take care not to dismiss for reason of poor performance/capability and then provide a satisfactory reference. It would be difficult to persuade a tribunal that an employee was fairly dismissed for being incapable of doing his/her job, if he/she had been given a glowing or even satisfactory reference.
- Exit interviewOpen
The purpose of an exit interview is to help you understand why your employee has decided to leave your company. The picture you build up from successive exit interviews will identify persistent problems (with work, management or pay) so you can consider taking remedial action to prevent future staff losses. Most leavers stress positive reasons for their decision: a new challenge, an opportunity too good to miss, a bigger salary. They are unlikely to criticise the company or their manager when they need a good reference for their new employer. Managers, reluctant to hear criticism, readily accept the superficial explanation and an opportunity to learn is missed. To overcome this, try using someone other then the leaver’s immediate manager to conduct the interview. Ask probing questions such as:
- What prompted you to start looking for a new job?
- What were your working relationships like with your manager, your colleagues, other departments?
- What do you think of the company’s policy on pay and benefits?
- What did you like/dislike about your job?
Alternatively, use a questionnaire posted to the leaver after the termination date.
- Final paymentsOpen
Before you arrange any final payments, check the leaver’s contract of employment. The contract should specify:
- How accrued holiday pay is calculated
- Whether the employee has an entitlement to any bonus payment (perhaps paid pro rata)
- What benefits continue during the notice period
- Whether the employer is entitled to make a payment in lieu of notice
- How to steer clear of claimsOpen
To steer clear of claims employers need to:
- Decide who can give a reference and set out a clear policy on references and who can give them. Ideally all references should be given by a manager of appropriate seniority in the company. Indicate whether the referee has personal knowledge of the employee
- Decide whether simply to confirm employment details or give a full reference including an assessment of work and character
- Never refuse to provide references as an act of retaliation against an employee who has previously claimed discrimination
- Treat all requests for references equally and avoid discrimination
- Ensure that all statements are based on fact
- Mark all references confidential
- Do not give oral references
- Establish prior to the ending of a worker’s employment whether or not he/she wishes the company to provide references or not
- Payment in lieu of noticeOpen
If you do not wish the employee to work for all or part of the notice period, you should make a payment in lieu of notice. Failure to do so will be a breach of the employee’s contract of employment and is likely to result in a claim for wrongful dismissal. If you wish to pay in lieu and there is no specific clause in the contract allowing you to do so, you will technically be in breach of contract. However, provided you:
- pay the employee what he/she would have earned during the notice period
- continue to provide any benefits for the whole of the notice period, or make a payment in compensation
there will be no incentive for the employee to claim any damages for wrongful dismissal. Where there is no payment in lieu of notice clause in the contract, it may be possible to make these payments tax free (up to a maximum of £30,000). This is because they may be regarded by HM Revenue & Customs as damages for breach of contract rather than earnings. The employee is only entitled to the amount of money he/she would have received had the contract not been breached. This would be the net amount, having made the appropriate deductions for tax and National Insurance. The employer can therefore choose whether to pay the full, gross amount to the employee or pay the net amount and retain the tax and NI deductions, which do not have to be paid to HM Revenue & Customs. An employer’s ability to make a tax free payment of damages will, however, depend on custom and practice within the company. If it is normal practice to pay in lieu of notice, a pay in lieu term may be implied into the contract of employment and the payment will be taxable, even though there is no express clause in the contract. Employers should think carefully about making a payment in lieu of notice when there is no contractual provision for doing so and the employee’s contract of employment contains any restrictive covenants. Restrictive covenants are designed to protect the employer’s business from unfair competition both during an employee’s employment and after its termination. The most common covenants cover:
- The use of confidential information
- Preventing an employee from working for a competitor
- Preventing an employee from soliciting customers, suppliers and/or employees
If, by paying in lieu, you have technically breached the contract, you will be unable to enforce the restrictive covenant. No such difficulty arises where the contract of employment contains a clause which entitles the employee to receive a payment in lieu of notice. In this case, however, the payment in lieu will be contractual and therefore taxable. Some contracts of employment allow for a payment in lieu of notice to be made at the employer’s discretion. The contract may be worded so that the employer has the right to decide whether to make such a payment but is under no obligation to do so. In such a case, if the employer exercises discretion and makes a payment in lieu of notice, the payment will be taxable. Whenever you are contemplating making any tax free payment to a leaver, it is always best to clear it in advance with HM Revenue & Customs. The taxation of final payments is a complicated area and you may also wish to take professional advice from an accountant.
Redundancy is a form of dismissal. An employee is dismissed by reason of redundancy if the dismissal is due wholly or mainly to:
- The fact that the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed
- The fact that the employer has ceased, or intends to cease, to carry on the business in the place where the employees worked, or
- The fact that the requirements of the employer for employees to carry out work of a particular kind in the place in question have ceased or diminished or are expected to do so
Employees who have been continuously employed for two years will be entitled to a Statutory Redundancy payment. However, employees only need one year’s continuous service to bring a claim for unfair dismissal, so it is important that any redundancy procedure is carried out correctly and fairly.
Should you have a redundancy situation you should contact the ABDO HR Service advice line to discuss how to deal with this.
An employer is under no legal duty to provide a reference, except in the financial services sector. Whenever a reference is given, whether for employment or any other purpose, the referee has a duty of care to both the subject of the reference and the recipient. The employer must use reasonable care in the preparation of a reference to verify the information on which the reference is based. If the reference is inaccurate, the employer faces the possibility of being sued by the subject of the reference for negligence or defamation. There is also the possibility of being sued by the recipient of the reference for breach of the duty of care. An employer is also under a duty of care to provide a reference which is in “substance true, accurate and fair”. The reference must be reasonable and not give an unfair or misleading impression overall. Employers who are ‘economical with the truth’ in references should also beware. Even if everything said is true, if what is left out would change the references, it is negligent. An employer could be excused for thinking that it may be simpler merely to confirm employment details. Although it is doubtful that this should be called a reference since it contains no assessment of work or character, as long as there is no duty to give a reference, this should suffice.
When an employee wishes to resign, it is best to ask for the resignation to be submitted in writing, specifying the termination date. This avoids confusion between the date the resignation was tendered and the date the employee intends his/her employment to end (usually the last day of the notice period). Whether the resignation is verbal or written, it is best practice to acknowledge it in writing. For a letter which can be used for this purpose, please see Letter to acknowledge a resignation.
An employee’s notice period is normally included in his/her contract of employment. The employer is entitled to be given the amount of notice specified in the contract. This can, however, be varied provided both parties (the employee and the employer) agree to the variation. If, for some reason, the contract does not specify a notice period, the employee is required to give the employer one week’s statutory notice, provided he/she has been employed for one month or more.
If an employee resigns and gives less than the required period of notice, he/she would technically be in breach of contract. However, unless the employer can prove a resulting financial loss and wishes to sue for damages, there is little that can be done. The employer is, of course, only obliged to pay the employee for that part of the notice period the employee actually works.
When an employee is working his/her notice, all of the provisions included in his/her contract of employment, including any benefits, continue to apply.
A resignation cannot be withdrawn except with the employer’s agreement. However, a resignation tendered in the heat of the moment and retracted quickly should be treated with caution. Wait until the situation has calmed down and confirm the employee’s actual intentions.
A resignation which is tendered under pressure, for example under the threat of dismissal, will constitute a dismissal.
There is now no legal retirement age.
Employees cannot be asked to leave or dismissed on the grounds of age. Should an employees age impact on their ability to do their job, this should be dealt with the same as any other performance or capability issue.
Employees who choose to retire should resign giving their contractual notice.