Notice periods: An essential guide for employers
With a third of workers looking for a fresh start this year, successfully managing notice periods is crucial. In this guide we’ll examine what employers need to know about the different types of notice periods, their legal obligations and fixed term contracts.
Most people will switch jobs multiple times during their career. While resignations have dropped over the last couple of years (in 2021 the number of people looking for a new job was a staggering 90%), every employer still has to manage notice periods.
The fact that not every new job works out serves to underline how vital it is for employers to understand notice periods. Studies have shown that 33% of new employees hand their notice in within the first six months.
What is a notice period?
A notice period is the amount of time an employee must work between handing in their notice (formally telling their employer they are leaving) and their last day of work.
Notice periods are in place to protect employers and employees. Generally speaking, it means that an employee can’t just walk out of work and an employer can’t just dismiss them on the spot. There are exceptions to this, but in essence, a notice period gives both employers and employees time to adjust.
Although notice periods work both ways, they don’t have to be identical. An employer can require an employee to give them a longer notice period than the one they offer to employees if they ask them to leave, for example.
Different types of notice period
There are two main types of notice period – statutory and contractual. A statutory notice period is the minimum period of notice required to end a contract of employment in law. The contractual notice period is what’s written and agreed upon in the employee’s contract.
In situations where both contractual and statutory notice periods could be used, whichever is the greater applies. For example, if the statutory minimum notice period is a week, but the contract provides for a month’s notice, the employee will be entitled to a month’s notice.
Statutory notice periods
The laws which apply to minimum notice periods are outlined in the Employment Rights Act 1996 (‘ERA’), which sets out the minimum notice periods employees and employers must give. The legal obligations kick in once an employee has been with an employer for a month. Before that, you are not legally obliged to give them a notice period, and an employee does not have to work notice either.
After a month, the legal minimum notice period will vary depending on the length of employment. Generally, once an employee has worked for a month but for less than two years, the employer has to give a minimum of one week’s notice. This increases by a week for each year of service up to a maximum of 12 weeks’ notice. However, the minimum notice an employee must give after a month’s service is one week, regardless of how long they remain employed.
At a glance, the statutory notice periods an employer needs to give are:
- At least one week’s notice if employed between one month and two years.
- One week’s notice for each year if employed between 2 and 12 years.
- 12 weeks’ notice if employed for 12 years or more.
Gardening leave
There are times when you may not want an employee to carry on working once they’ve resigned but you don’t want to drop the notice period either.
An example of this is a senior employee – a salesperson, perhaps, who is joining a competitor. Their day-to-day role involves close relationships with clients and access to sensitive commercial details. You don’t want them leaving on a Friday and joining your competitor the following Monday, potentially taking clients with them. This is where gardening leave comes in.
Gardening leave is when an employee is sent home but remains employed and on full pay while they serve their notice period. It means they are not required to work or allowed to have work-related contact with colleagues, customers or clients, and other business contacts. Instead, they are free to be at home and pursue hobbies (like gardening). An employer can ask an employee on gardening leave to do certain tasks if and when needed, so employees are expected to be available to work.
Summary dismissal
There are some situations which allow an employer to dismiss an employee without notice. For example, if an employee is guilty of gross misconduct. This is known as a summary dismissal.
Gross misconduct includes serious acts such as fraud, harassment and violence, disregarding safety regulations, damaging company property, stealing property or information and working under the influence of drugs or alcohol.
While stealing a company laptop, slapping a colleague, or being drunk at work might seem obvious reasons to sack someone on the spot, it’s still sensible to follow a fair disciplinary procedure. This will minimise the risk of potential employment claims, such as unfair dismissal.
Fixed term contracts and notice periods
With a fixed-term contract, employees will know when the period of employment is set to end. So, in theory, notice does not need to be given. However, this will depend on how the contract is drafted.
For example, does the period of employment automatically end on expiry of the fixed term? Or does the contract provide for an initial fixed term, six months or a year, after which it continues unless and until notice is served? In the second example, a notice period would apply.
Strictly speaking, it makes sense for employers to discuss the situation about renewing the contract in advance, and well ahead of the expiry of the fixed term. If the contract isn’t to be renewed, confirm the position to the employee in writing. Making it clear will reduce the risk of an employee claiming a breach of contract.
What if an employee doesn’t work their notice period?
Technically, an employee refusing to work during their notice period amounts to a breach of contract, unless they have grounds for constructive dismissal. Although you can’t force employees to go to work, an employer could take an employee to court and claim damages for the breach of contract. However, this is likely to be time-consuming and expensive. Instead, employers can remind the employee that if they don’t work the notice period they won’t be paid.
If the employee wants to skip their notice period because they are starting a new job immediately, the employer can also remind them that their contract states they are not free to start another job until the end of the notice period, and may not receive a reference letter if they refuse to work their notice. However, in some cases, an employer may choose to negotiate a shorter notice period so a replacement can be quickly hired and trained.
FAQs
- When does a notice period begin? A notice period starts the day after notice is given. For example, if an employee has to give one month’s notice, and they hand their notice in on 23 April, the notice is effective from the next day. So, in this instance, the employee’s last day of employment will be 23 May.
- Does notice have to be given in writing? It depends on the contract. Sometimes the contract requires notice to be confirmed in writing – this encourages clarity and makes it easier to confirm acceptance. However, in practice, many employers will take a pragmatic approach and accept verbal notice. When this happens, it makes sense to promptly follow this up with an acknowledgement letter to the employee. The letter should confirm when notice was served and when the last day of employment will be. This can also include any relevant arrangements, such as garden leave, payments, holidays, return of company property, exit interview, handover, and reminding the employee about any restrictive covenants/post-termination restrictions in their employment contract.
- Can notice be withdrawn? Notice can’t be unilaterally withdrawn. If an employee resigns and then later changes their mind, employers are under no contractual obligation to let them keep their job. But in some cases, where a resignation was made in the heat of the moment, not agreeing to allow an employee to withdraw the resignation risks turning a resignation into a dismissal for unfair dismissal purposes..