End of employment

Leaver process (payroll, return of equipment, exit interview etc)

If you dismiss an employee, you need to ensure a fair process is followed. There are five potentially fair reasons for dismissing staff:

  • Capability;
  • Conduct;
  • Contravention of an enactment (where continued employment would contravene the law);
  • Redundancy;
  • Some Other Substantial Reason (SOSR);

You should always be clear which one applies in any case. A dismissal can also be constructive, where an employee resigns in response to their employer’s breach of contract. Most staff who leave will do so voluntarily. It is important to be systematic when an employee leaves so that nothing is overlooked. Where the employee has outstanding holidays at the end of the notice period, the number of days remaining should be calculated.

Employees will be paid in lieu for any holidays not taken within their notice period. This needs to be calculated and paid to the employee with their final wages and shown as a separate item on their payslips. Holiday pay should be subject to the same rules relating to the payment of tax and national insurance contributions as normal pay. If at the date of termination, the employee has taken more paid holidays than they would have been entitled to, arrangements will have to be made to recoup what would be an overpayment.

Their employment contract should ideally contain a clause that allows you to deduct this sum from the final wage payment. However, if there is no such clause in the contract you will have to obtain the signed consent of your employee before taking the money, alternatively, agree another way for the overpayment to be reimbursed.

It is good practice to carry out an exit interview with your resigning employee before they leave to establish the true reason behind their resignation. This is important management information to collate, as it may be useful to assist in identifying problems in the workplace and addressing them where appropriate.

The interview should be conducted by someone with knowledge of the employee's particular role within the PCC and will provide an opportunity to deal with practical aspects of the resignation as well as exploring the employee's reasons for leaving. The exit interview should include:

  • Identification of the reasons for leaving, if the employee is willing to provide these;
  • Discussion with the employee of any procedures put in place to deal with the proper handover of their duties;
  • An opportunity for the employee to return any company-owned equipment or other property, or make the necessary arrangements to do so;
  • Confirmation that the employee is aware of the arrangements that have been made for their departure, including the date on which any outstanding payments will be made to them.

On the employee’s last day of work ensure that all security passes, passwords and other security measures are disabled. Do not automatically presume that the employee must be replaced by someone doing the same job. Take the opportunity to consider what is actually needed in the organisation. Remember to consider how the employee will be covered if it is not possible to get an immediate replacement. Do not presume that existing employees can take on extra work.


Resignations

An employee who wishes to leave should do so by submitting their resignation clearly in writing so that there is no dispute surrounding their intention. This is particularly important if they are angry or upset when they resign.

Upon receipt of a written notice of resignation by an employee, you should prepare a letter accepting the resignation and advising the employee of the organisations exit procedure. This will include procedures relating to informing any relevant customers, suppliers or other external bodies and the arrangements relating to working their notice period. The letter should also address the following:

  • The applicable notice period;
  • The date on which that notice period will end;
  • The last date on which the employee will be required to present themselves for work;
  • Confirmation of the position regarding holiday pay;
  • The dates on which the employee can expect to receive their final pay;
  • A reminder of any contractual provisions or benefits that may continue after the employment has terminated;
  • Practical information with regards to any continuing benefits, such as pension entitlement, and details of how your employee can obtain further information about these if they need to;
  • Procedures relating to the return of PCC property.

You can also use the letter of acceptance as an opportunity to clarify any other practical steps that need to be undertaken. This includes any handover arrangements that need documenting.

Once you have accepted the employee’s resignation in writing, agree with the employee who has resigned when colleagues will be told and by whom. The employment contract usually provides an obligation on employees to give a period of notice of their intention to leave the organisation.

Unless you and employee agree otherwise, the contract of employment will continue to operate as normal during the notice period. This means that the employee is obliged to attend work and perform the job as usual during the notice period, and you are likewise bound to pay the employee and act in accordance with its obligations under the contract of employment.

In some circumstances, you may prefer that an employee does not work their notice period. There is nothing to prevent you from requesting that your employee leaves without working their notice. However, care needs to be taken as to the process by which such an arrangement is made. If there is a clause within the employment contract providing for payment in lieu of notice (PILON), the position is as follows:

  • You should notify the employee in writing that you will not require them to work their notice period;
  • All benefits and entitlements should be paid up to and including the last day of the notice period unless the PILON clause in the contract expressly states otherwise;
  • Tax and national insurance will be payable on the PILON in the usual way;
  • The date on which the employer terminates their employment will be their last working day.

It is not best practice to make a PILON in the absence of a contractual clause allowing you to do so. This is because such actions can result in unfavourable consequences. These can include invalidating confidentiality or restraint of trade clauses in the employment contract that would have otherwise survived the termination of the contract.

If there is no such clause within the contract of employment, not permitting your employee to work until the end of their notice period will amount to a technical breach of contract on your part. This changes the position slightly as follows:

  • You should notify the employee of the last date on which you will permit them to work (technically you will be dismissing them on this date without notice);
  • You should calculate their usual pay up to and including their last day of work. You must pay this amount and deduct tax and national insurance in the usual way;
  • You should then calculate separately all the payments and benefits which they would have been entitled to had you allowed them to work their notice period. This should include entitlements such as holiday pay and pension contributions. The total amount of these items is the amount of compensation you need to pay to the employee for your breach of contract. It should amount to what they would have been paid if your technical breach had not occurred;
  • The above compensation payment will not be subject to the usual deductions and should not be paid through your payroll system because it is not a payment of wages. It should be sent to the employee separately with a full breakdown of the individual components of the payment.

If you do not want the employee to work his or her notice period, the employee can be sent home on "garden leave" and be excluded from the premises or from having any contact with other employees, parishioners, etc. Garden leave is when an employee remains on the payroll and as an employee during their notice period but is not required to actually work. Their employment contract would need to have been drafted to expressly provide for the employer to invoke a period of garden leave.


Retirement

If an employee does inform you that they are planning to retire ask for this to be confirmed in writing. On receipt of the written request, you should reply in writing.

If an employee decides to retire they are only obliged to give the same amount of notice that they are required to give under their employment contract. However, it is beneficial to both parties if more notice is given to enable the employer and employee to work together to make the final arrangements as streamlined as possible.

You can jointly draft a note with the employee advising other staff of the employee's impending retirement date. You should, however, ensure that the employee who is retiring has approved the contents of the document before it is sent to any members of staff within the organisation.

You should arrange for the handover of work-related items such as laptops, mobile phones and other PCC owned items, in the same way as you would for any other employee who is leaving the organisation. When requesting work-related items such as laptops, mobile phones and other PCC-owned items, ensure that the handover of the equipment is undertaken and that all work is handed over in a dignified manner.

You may also wish to co-ordinate for the employee's retirement gift and assist in arranging some sort of social event to celebrate their retirement. Such an event provides a good opportunity for you to acknowledge the contribution an employee has made to the PCC throughout their employment. However, you should treat this sensitively and confirm that the employee would appreciate such a celebration before going ahead and arranging.

You will need to consider fairness between retiring employees and other staff leaving the organisation to ensure there is no disparity in the way celebrations are arranged which could amount to age discrimination against younger workers.


Protected or without prejudice conversations

Sometimes, one side in an employment relationship may begin to feel that the relationship has run its course. This feeling could arise from a specific dispute, or the relationship may have deteriorated to the point where it is difficult to imagine it ever recovering. In these situations, it is possible, as an alternative to standard HR and employment tribunal processes, to reach a mutual agreement on ending the employment relationship.

This will eventually take the form of a “Settlement (formerly Compromise) Agreement”. Settlement agreements are legally binding contracts. They are commonly drawn up to remove employees’ rights to bring a claim arising out of their contract of employment to an Employment Tribunal or other court and can be used to protect confidentiality.

Settlement negotiations can be opened by the employee, however more often it will be the employer that approaches the subject. These negotiations are amongst the most difficult conversations you can have.

Although there are instances in which an employee is amenable to settlement and the process can run quite smoothly as often the employee is initially resistant to the process. It is, of course, important to treat employees with respect, and you should ensure that the tone of the discussions remains appropriate e.g. adult to adult.

When you suggest to somebody that you would like to talk about ending their employment, their thoughts will immediately turn to their mortgage, their partner, their children and so on, and they’re likely to become emotional. As far as is possible, you want to create a sense of partnership with the employee and work with them to find mutually agreeable terms. Inevitably that will mean compromise.

The important legislation covering settlement agreements and discussions is section 111A of the Employment Rights Act 1996. Settlement agreements can be entered into without a risk of the employee referring to them as part of an employment tribunal case. However, you do need to act professionally and without applying pressure.

If there is an existing dispute with the individual e.g. a grievance or disciplinary case, you would need to have the discussions on a ‘without prejudice' basis, which again means that the existence of the discussions cannot be used as evidence in any claim for unfair dismissal. The ACAS Code of Practice on Settlement Agreements and its booklet Settlement Agreements: A Guide sets out more factual detail on this.


Redundancy

The Acas guide sets out how to manage each stage of the redundancy process, i.e. to:

  • Avoid compulsory redundancies;
  • Consult staff;
  • Select staff for redundancy;
  • Give staff notice;
  • Work out redundancy pay;
  • Support staff and plan for the future.


References

Advice on providing references is available from Acas and the gov.uk site. In general terms, you do not need to provide a reference but, if you do, it must be fair and accurate.


Page last updated: 15th December 2021 12:22 PM