What you need to know before hiring in the UK: A guide to terminations

When you’re expanding your business and making your first UK hire, the last thing you’re thinking about is termination policies, much less letting your newly hired employees go. However, the laws about dismissal are murky in the United Kingdom, and you’ll need to tread carefully to avoid legal repercussions.

Both employers and employees alike are protected under UK employment laws:

• An employee cannot be dismissed without reason.
• But if the team member cannot do their job, resulting in an additional burden on other workers, the employer can let that team member go.

Whatever the circumstances, it’s best to be prepared. That way, if an unfortunate situation does arise, you’ll be able to handle it smoothly and in compliance with the law.

Read on to learn everything you need to know before hiring UK employees—and how hiring through an Employer of Record (EOR) can spare you from bungling any local dismissal requirements and ensuring your employment contract is airtight.

5 essential things to know before hiring in the UK

• Your company’s termination policy must be clearly stated in the offer letter. When you send an official offer letter to your new hire, one of the components that must be included is your business’s termination policy. The employment contract should include the reasons an employee may be dismissed, how much notice they can expect to receive, and circumstances (backed by UK law) that warrant immediate dismissal without warning.
• UK laws don’t recognize at-will employment. At-will employment permits the company to let an employee go without reason or notice. UK law prohibits this practice.
• Depending on the circumstances, employees may have grounds for unfair dismissal. Particularly if an employee is being dismissed without notice (i.e. a substantial reason provided by the employer), the onus is on the employer to demonstrate the reason for their decision is valid and that their actions are nothing short of reasonable. Furthermore, if the employee can prove that they are being unfairly dismissed and targeted when other employees at the company are known to engage in the same behaviors, there may be grounds for an unfair dismissal claim.
• Employees might be entitled to statutory redundancy pay. In the UK, just as in other countries, businesses frequently lay people off to not only reduce their workforce, but also because they’ve decided to replace a current employee for a new one. If this happens, an employee may be entitled to statutory redundancy pay. If they’ve been working continuously for the same employer between two and 20 years, they may be entitled to financial compensation as well. Here’s what to expect:
  • For each full year an employee was under the age of 22, they’ll receive half a week’s pay.
  • If an employee is older than 21 but under 41, they’ll receive one week’s pay for each full year.
  • Once they turn 41, they can expect one and half week’s pay for each full year.
• Employers do not always have to offer severance pay. Unlike the United States, where offering severance pay is common, the same isn’t true in the United Kingdom. In fact, employers frequently only offer severance to employees who had high salaries. In return, by signing this agreement, these individuals agree not to go after the company through legal channels.

Termination rules in the UK: What are acceptable grounds for firing an employee?

UK employees are permitted to terminate their contracts on their own. Below, we’ll review a few of the common scenarios employers and employees alike should be aware of. If they are still on the probationary period and have been with the company for less than a month, they are not required to give any notice unless the contract they signed specifically says otherwise. Here are the reasons an employee can be terminated involuntarily in the United Kingdom:

• Termination during the probationary period. Probationary periods need to be defined in the contract of employment, and they typically last about six months. This helps both the employer and the new hire ensure the latter is suitable for the job, that they fit well with the company culture, and that the working relationship will be a positive one. Employees who have been with the company for less than a month are permitted to terminate their employment (unless the contract they signed specifically prohibits it). On the flip side, UK employment laws do not prohibit employers from dismissing employees on probation who simply aren’t going to work out.
• Termination after the probationary period. Employees must be given a valid reason for the termination, such as continuous poor performance or misconduct. Failure to follow a fair and statutory termination process could result in an automatically unfair dismissal and the employee could be due compensation or need to be reinstated in their role. Employers need to implement a performance improvement plan (PIP) first before terminating an employee if the reason for the termination is poor performance and a disciplinary process will need to be followed if the reason is related to issues with misconduct.
• Termination without cause. As mentioned earlier, at-will employment does not exist in the UK. A UK employee is entitled to written notice of the employer’s intention to terminate their employment or pay in lieu of notice. The length of the required notice period depends on how long the employee has worked for the company.
• Termination for cause. If employment is terminated with just cause, then no notice or pay in lieu of notice is required. The onus is on the employer to show just cause. Examples include gross misconduct, conflict of interest, theft, or violence.

• Termination due to redundancy. Employees can be made redundant if the company is experiencing financial difficulties or restructuring the organisation and the employees’ roles are no longer required. Depending on the employees’ length of service, a formal workforce reduction process (consultation process) will need to be followed and the employees may be due additional redundancy pay. 
• Mutual separation agreement. A mutual separation agreement is an agreement under which an employer and an employee mutually end their employment relationship on agreed terms. Typically, it is an agreement for an employee to waive their right to make future claims or take legal action against the employer, usually in exchange for a separation package or a waiver of restrictive covenants such as a non-compete. Mutual separation agreements may also include post-employment restrictions such as non-disclosure or non-disparagement agreements.

The United Kingdom’s termination requirements might differ from those in other countries where you hire, and it’s crucial to keep your global hiring compliant with local laws.

The easiest way to comply with UK termination requirements

If you employ a global workforce, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries.

An alternative is to hire through an EOR, which can monitor termination requirements for you. Rippling, for instance, will localize employment agreements on your company’s behalf.

Rippling ensures contracts adhere to termination requirements for all of your UK employees—regardless of whether you’ve set up your own local entity. It also automatically enrolls your new hire in statutory benefits, while allowing you to manage payroll for your entire international workforce.

Frequently asked questions about terminating a team member’s employment in the UK?

Do you need a reason to terminate an employee in the UK?

Yes, the employer will need to demonstrate that they had a valid reason for doing so and that their actions and process/es followed were fair and reasonable. They must also prove they investigated the issue thoroughly and did not make the decision on a whim or on hearsay.* Finally, the same goes for part-time employees and those with fixed-term contracts; They cannot be treated differently from full-time workers.

What is considered just cause for terminating employment in the UK?

UK employers are permitted to dismiss employees in the case of serious misconduct. This can include:

• Physical violence
• Fraud and/or theft
• Serious and repeated insubordination
• Pathological lack of care to both completing their duties and their treatment of and impact on their coworkers
• Sexual harassment and other forms of gross misconduct

Generally, UK employers try to remedy the situation via a fair procedure before they decide there’s nothing left to do but proceed with termination of employment. The first step is usually an investigation of the situation, followed by a meeting with the employee that results in a written warning and clear expectations of what you expect from them. A second meeting is often held if the initial conversation did not produce any results, and by the time the third meeting rolls around, dismissal is likely. Particularly if the worker displayed violent behavior, the termination is considered to be a fair dismissal.

Of course, in situations that involve gross or serious misconduct, such as harassment and theft, the employee should be terminated immediately.

What is the law for dismissing a contractor in the UK?

You don’t have a lot of options when it comes to cutting ties with independent contractors in the UK. Your best bet is to terminate the contract, give a polite and honest reason why, and move on.

If an independent contractor is found to be misclassified, the strict regulations set down by the HMRC and GOV.UK entitle them to employment standards legislation protections and notice or termination pay in lieu of notice.

Are there layoffs in the UK? What is redundancy pay?

In Northern Ireland, if an employer doesn’t have enough work for a team member to do, they may be able to tell them not to come in. In certain circumstances the employee will not be paid during this time.

If an eligible employee has been laid off for more than four weeks in a row, they can apply for redundancy pay.

In the UK, if an employee's working hours are reduced due to business reasons, the employee has to be consulted and agree to the contractual changes. If the employer tells the employee not to come to work for x number of days, these days are usually paid at full rate.

If an employee is made redundant, a formal redundancy process, which includes consultation meetings, formal letters explaining the situation etc., will need to take place and redundancy pay would be required for all employees who have over one years continuous service in Northern Ireland and two years continuous service in England, Wales and Scotland, with the company.

Manage the entire lifecycle of your international employees with Rippling

From onboarding to offboarding, Rippling helps you streamline the entire employee lifecycle—globally, and all in one place.

Just click "hire" and Rippling can support your global workforce right out of the box:

• Set up a localized UK employment agreement.
• Pay employees and contractors in the UK and around the world—without waiting for bank transfers or conversions.
• Easily stay compliant with UK overtime, leave, and termination requirements.

Catch Rippling in action and learn how Rippling EOR can monitor the tangled web of global termination requirements—so you don’t have to.

Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.