Dismissing an Employee Fairly

Dismissing an employee is sometimes unavoidable, either because an individual is behaving badly or underperforming at work, or the business simply cannot afford to maintain its current levels of staff. As an employer, even where you have a clear and legitimate reason for letting someone go, it remains important that you approach any dismissal in a fair and lawful way.

The following practical guide looks at what the law says about dismissing an employee, including their rights and your responsibilities on dismissal, as well as how to follow a fair process and the consequences of getting this wrong.

 

Dismissing an employee: what employers need to know about firing someone fairly

By law, an employee has the right not to be unfairly dismissed. This means, as an employer, you must be able to show that you have a genuine and valid reason for dismissing an employee. The Employment Rights Act 1996 sets out the following five different ways in which you can legally justify a dismissal:

By reason of redundancy

There are various reasons why a business may legitimately need to reduce its number of staff, for example, where there has been a reduction in workload, or a change in the type of work that is available, or a change of location or where operations in an area are closing down.

By reason of capability

This refers to an employee’s ability to perform their job role to the required standard. If an employee fails to meet targets or pass any training, or where they are no longer able to do their job due to long-term ill health or injury, this could justify dismissal.

By reason of conduct

If an employee is guilty of some form of misconduct, for example, persistent lateness or unauthorised absences from work, this can provide a lawful basis on which to dismiss them.

For a legal reason

This can be used to dismiss an employee if continuing to employ them would mean you are both breaking the law, for example, where an HGV driver loses their driving licence.

For some other substantial reason (SOSR)

This is a statutory ‘catch-all’ provision that allows an employer to fairly dismiss an employee where no other potentially fair reasons apply, for example, where a business has recently undergone a restructure, but this doesn’t give rise to a redundancy situation because there is no reduction in the work to be undertaken.

 

Employee rights on dismissal

An employee’s rights on dismissal will very much depend on how long they have worked for you. An employee can only usually claim unfair dismissal if they have worked for you continuously for a qualifying period of two years.

This means that, at least in theory, you can dismiss an employee with less than two years’ service without having to justify your decision. That said, where there are written disciplinary and dismissal procedures in place, these must still be followed, otherwise risk a breach of contract claim for wrongful dismissal.

There is no qualifying service requirement for an employee to claim wrongful dismissal. There are also certain circumstances in which an employee will be entitled to claim unfair dismissal from day one of their employment. This is known as automatically unfair dismissal.

Typically, an automatically unfair dismissal occurs when the dismissal violates an employee’s statutory employment rights. Dismissing an employee will, for example, be classed as automatically unfair if the reason for the dismissal is connected with any of the following:

• Pregnancy and all grounds relating to maternity
• Family reasons, including parental, paternity, adoption and dependants’ leave
• Assuming the role of an employee or trade union representative
• Joining or not joining a trade union
• Being a part-time or fixed-term employee
• Pay and working hours, including minimum wage and annual leave
• Whistleblowing, ie; reporting wrongdoing in the workplace

 

What are an employer’s responsibilities when firing an employee?

When dismissing an employee, even where you have a genuine and valid reason for so doing, you must still show that you acted reasonably and followed a full and fair procedure. Any failure to do so can make the dismissal unfair, regardless of being able to prove one of the five fair reasons as set out under the 1996 Act.

There is no statutory definition of what is ‘reasonable’, although there are various factors that can influence whether or not a dismissal is fair. These can include whether the reason you gave for the dismissal was the real one; if you acted reasonably in treating that reason as sufficient for dismissal; if the decision to dismiss fell within a range of reasonable responses; and whether you carried out proper investigations and followed the relevant procedures.

For automatically unfair dismissal, however, all an employee needs to prove is that the cause for their dismissal was for one of the reasons prohibited by law. No further consideration will be needed as to the reasonableness of the decision to dismiss or the procedural fairness of your actions.

In all cases, you must also ensure that you provide the employee with the correct notice period, or pay in lieu of notice where their employment contract permits this. Any failure to provide the correct statutory or contractual notice will again result in a potential claim for wrongful dismissal.

The statutory minimum period is one week’s notice if the employee has worked for you for between one month but less than two years, with one additional week for each complete year of employment up to a maximum of twelve weeks, for example, 12 weeks’ notice for 12 years’ service.

The only exception to this rule is where you can justify summary dismissal for gross misconduct. This can include things like theft, fraud, the use of physical violence or threats of violence, intoxication at work through drink or drugs, breaches of health and safety, or serious insubordination in the workplace.

Where there is clear evidence to support your finding of gross misconduct, dismissing an employee without notice, or pay in lieu of notice, can be lawful, as long as you undertake a full investigation and follow a fair disciplinary process.

 

The role of a fair process when dismissing an employee

The process that you follow when dismissing an employee will depend on the reason for the dismissal. In all cases, however, the process must be full and fair.

When selecting people for redundancy, for example, a fair selection process must always be followed. This could be based on criteria such as an employee’s skills qualifications or standard of work, or their disciplinary and attendance records.

You cannot, however, select an employee for redundancy in any way that would discriminate against them by reason of a protected characteristic. This could include things like age, sex or disability. This means that when applying certain selection criteria, such as attendance, you would need to discount, for example, any maternity-related absences to avoid discriminating against female staff.

Prior to embarking on any redundancies you must also follow a fair consultation process so that you can respond to any representations made by employees or their representatives, and to consider any reasonable alternatives to dismissal. If you are making 20 or more employees redundant within any 90-day period, there are specific collective consultation rules that must be followed.

In the context of capability or conduct dismissals, even in the absence of any contractual disciplinary procedure, you should always refer to the guidance set out under the ACAS Code of Practice on Disciplinary and Grievance Procedures.

The code sets out a number of steps that should be taken prior to dismissal, including the provision of written warnings and suitable training, where appropriate, giving the employee an opportunity to improve their performance or change their behaviour. You will also need to inform the employee of their right to be accompanied at any hearing and give them the chance to appeal.

Any failure to follow the ACAS code will not automatically make any dismissal unfair. However, a tribunal can increase an award of damages made against you by up to 25% for any unreasonable failure to follow this guidance.

 

Fair dismissal procedure

Fairly dismissing an employee is not just about having a genuine and valid reason to bring their employment to an end, although having a fair reason is the first step before making a decision to dismiss. An employer must also act reasonably in treating that reason as sufficient to justify dismissal in all of the circumstances ‘and’ follow a fair procedure.

Dismissing an employee is often unavoidable, either because that person is guilty of misconduct or poor performance, or redundancies need to be made. It could also be where it would be illegal for an employee to continue in their role, for example, where an HGV driver loses their licence, or for some other substantial reason, such as where an employee has been arrested and this could seriously damage the reputation of the business. As set out in the Employment Rights Act (ERA) 1996, capability or conduct, redundancy, statutory illegality or some other substantial reason (SOSR) are the five fair reasons for dismissal.

However, even where an employer has a legitimate reason for letting an employee go, for a dismissal to be fair and lawful, the decision must still be one that is reasonable in all of the circumstances. Although there is no statutory definition of ‘reasonableness’, certain basic requirements must be met in any dismissal scenario, including following a fair procedure.

Most employers will already have written disciplinary, capability and redundancy procedures in place, although what constitutes a fair dismissal procedure will still depend upon the facts of each case. In cases of misconduct or poor performance, the employer must also comply with the Code of Practice on disciplinary and grievance procedures provided by the Advisory, Conciliation and Arbitration Service (Acas), setting out the basic requirements of fairness that are usually applicable in dismissal scenarios. As such, in accordance with the Acas Code of Practice, in conduct and capability cases, the employer must:

• conduct a thorough investigation, without unreasonable delay, to establish the facts
• inform the employee of the allegations against them in writing, where there is a case to answer, and invite them to a disciplinary or capability hearing as soon as possible
• provide the employee with sufficient evidence to allow them to prepare their case
• notify the employee of their right, on reasonable request, to be accompanied at their hearing by a colleague, or a trade union representative or official
• present the evidence at the hearing and provide the employee, or any companion on their behalf, with the chance to present their case and any mitigation
• take into account previous decisions made in similar circumstances to ensure consistency
• consider all reasonable alternatives to dismissal, such as a first or final written warning, as well as demotion or redeployment
• notify the employee in writing of any decision to dismiss, including the reasons for this and the effective date of termination, and informing them of their right to appeal.

 

For redundancy, statutory illegality and SOSR cases, the dismissal procedure would need to be adjusted accordingly. For example, in a redundancy scenario, an employer should undertake a fair consultation process, providing affected employees with enough time to consider any proposals and make representations, and apply a fair selection criteria. The employer must also consider any reasonable alternatives to redundancy, including suitable alternative employment. If the employer is making 20 or more staff redundant within any 90-day period, there are special collective consultation rules that must be followed.

It may not be practicable for every employer, having regard to the size of their business or resources available, to take the same detailed steps in dealing with a dismissal. However, as a matter of best practice, all employees should act fairly and consistently at all times. They should also retain a written record of the dismissal process, including the reasoning behind their decision-making. In this way, the employer will have a documented account of what steps they have taken in the event of any claim for unfair or wrongful dismissal.

 

Dismissing an employee with a disability

It is important to recognise that employees with disabilities are afforded special legal protection at work, where caution should always be exercised when dismissing an employee suffering from a long-term physical or mental health condition.

Although it is possible to fairly dismiss an employee who is no longer capable of carrying out their job role because of injury or illness, you must always explore ways to remove or minimise any disadvantage an employee may be experiencing because of any disability. Dismissal should only be used as a last resort.

Under the Equality Act 2010, you are under a positive duty to make any reasonable adjustments, either in terms of workplace adaptations or changes to working arrangements, to assist a disabled employee. This could include measures such as a phased return to work following long-term sick leave, amended duties and altered hours, or the provision of specialised equipment and support.

Dismissal on the grounds of a disability, especially where insufficient steps have been taken to make reasonable adjustments, may be deemed to be both unlawful discrimination and automatically unfair.

A dismissal will only be fair, or non-discriminatory, where an employee is unable to do their job in the absence of any reasonable adjustments that can be made, and the person not being able to perform their duties is having a significant impact on your business.

 

 

Failing to follow a fair dismissal procedure

Unfair dismissal risks

If an employer fails to follow a fair dismissal procedure — or the decision to dismiss is otherwise unfair, for example, because the employer was not able to show one of the five fair reasons for dismissal or they acted unreasonably in treating that reason as sufficient to justify dismissal — the employee may be eligible to claim for unfair dismissal.

The statutory right to make an unfair dismissal claim arises where an employee has accrued two years’ continuous service with their employer. Provided that individual is classed as an ‘employee’ and not a ‘worker’, and they can meet the qualifying service requirement, they will be entitled to bring a claim for unfair dismissal before the employment tribunal. If successful, the tribunal may order the employer to pay the employee compensation.

Compensation following a successful unfair dismissal claim is made up of both a basic award and a compensatory award. The basic award is a fixed sum calculated to a statutory formula, depending on the employee’s age, length of service and their weekly pay. The compensatory award is an award to reflect future loss of earnings and any other losses caused by the dismissal, subject to a salary-based cap. In relatively rare cases, where appropriate, the employer may also be ordered to reinstate the employee in their old job or to re-engage them in a similar role on comparable terms and conditions.

In some instances, an employee may be entitled to claim automatically unfair dismissal. This is a day one right, where the law affords special protection to an employee who is dismissed for certain statutory reasons. In broad terms, an automatic unfair dismissal will occur when the dismissal violates an employee’s statutory rights, for example, where they are dismissed because they are pregnant, for asserting their right to minimum pay or paid holiday, or reporting wrongdoing in the workplace, also known as whistleblowing. In these cases, there will be no need for the employee to meet any qualifying service period. There will also be no need to consider the reasonableness of the dismissal decision or the procedural fairness of the employer’s actions, as the decision will be automatically unfair.

However, with the exception of claims for automatic unfair dismissal, when deciding whether or not a dismissal decision is unfair, the tribunal will look at whether: 1) the employer’s reason for the dismissal was one of the ERA’s five potentially fair reasons, 2) the employer acted reasonably in treating this reason as sufficient to justify dismissing the employee, and 3) the employer followed a fair dismissal procedure.

Having established a fair reason for the dismissal, the tribunal will go on to consider the employer’s conduct, and whether the dismissal was fair and reasonable in all of the circumstances. A tribunal will look at what procedures have been followed, having regard to the size and resources of the employer’s business and, where applicable, the guidance under the Acas Code of Practice. The tribunal will also consider whether the decision to dismiss fell within “a band of reasonable responses” available to that employer.

Even if the employer is able to establish a fair reason and demonstrate that their decision was reasonable, if they failed to follow a fair procedure, the dismissal will still be unfair.

 

Wrongful dismissal risks

In addition to the risks around unfair dismissal, when making a decision to dismiss, an employer must also be aware of the risks around wrongful dismissal. A claim for wrongful dismissal refers to the unlawful termination of an employee’s contract of employment. This can happen in various different ways, the most common example being a failure on the employer’s part to provide the minimum statutory or contractual notice period on dismissal.

Unlike unfair dismissal, where the employee will only usually be eligible to bring a claim if they satisfy the two-year qualifying service requirement, there is no corresponding qualifying period of service required to bring a claim for wrongful dismissal.

When dismissing an employee, the employer will be required to provide the employee with a minimum of one week’s notice where employed for one month or more but less than two years. If employed for at least two years, the employee will be entitled to two weeks’ notice, with an additional week for each extra complete year, up to a maximum of twelve weeks. This is known as statutory notice, although where the contract of employment makes provision for longer, the employee will be entitled to this enhanced contractual period.

It is possible to summarily dismiss an employee, ie; without any notice or payment in lieu, but only if they are guilty of gross misconduct. This is where an employee commits an act of misconduct so serious that this constitutes a fundamental breach of the implied duty of mutual trust and confidence, in this way justifying a decision to terminate their employment without notice. Common examples of gross misconduct include violence or threats of violence, intoxication or indecent behaviour, theft or fraud from the employer, serious insubordination, and serious breaches of health and safety at work.

When dismissing an employee for gross misconduct, the employer must still follow a fair dismissal procedure. This means that, before deciding to dismiss, the employer must fully investigate any allegations of misconduct and provide the employee with an opportunity to defend these allegations and advance any mitigation. The employer cannot simply dismiss the employee on the spot, where there may be circumstances that mitigate the gravity of the matter, such that this may not justify summary dismissal for a first offence. By failing to follow a fair procedure, the employer may not only risk a claim before the employment tribunal for wrongful dismissal, but also a claim for unfair dismissal.

Other scenarios in which an employee may have a claim for wrongful dismissal include where the employer has failed to follow any contractual dismissal procedure. This could be, for example, where there is a written dismissal policy providing for a prescribed procedure, but the employer follows a different procedure or fails to follow any procedure at all. Again, in these circumstances, the employee may also have an alternative claim for unfair dismissal. The employee may even be eligible to claim both wrongful and unfair dismissal in tandem, although they would not be entitled to double recovery for the same losses.

Wrongful dismissal is a common law right, concerned only with the employer’s contractual obligations, rather than any issues of fairness, whereas unfair dismissal is a statutory right arising if the employer has failed to dismiss for a fair reason or follow a fair procedure. As such, the amount of compensation awarded for wrongful dismissal will be based on the value of the employee’s salary and any benefits that they would have been paid had the contract been terminated lawfully. This could be to reflect the correct period of notice or the length of any contractual dismissal procedure, had this procedure been properly followed. In contrast, unless an employee is an especially high-earner with a particularly lengthy notice period, the potential damages for unfair dismissal will usually be far greater.

 

How does a claim for constructive dismissal differ from unfair dismissal?

Constructive dismissal refers to where an employee feels forced to resign from their job role because of a serious breach of the employment contract on the employer’s part, in most cases, where the employer has breached the implied term of mutual trust and confidence.

Examples of serious breaches on the part of the employer, sufficient to entitle the employee to resign in response to the employer’s conduct, could include:

• regularly not being paid the right amount without good reason
• being bullied at work, where the employer fails to take reasonable steps to prevent this
• being discriminated against, such as being refused a promotion because of being female
• raising a grievance at work that the employer refuses to investigate
• making unreasonable changes to working patterns or place of work without agreement.

 

To prove a constructive dismissal claim, the employee must be able to persuade the tribunal that the employer’s conduct was sufficiently serious to justify terminating the contract of employment ‘and’ that this was the reason for the employee resigning. Even though there is technically no dismissal in these circumstances, the law can still treat the resignation as a form of unfair dismissal or ‘constructive unfair dismissal’. However, as with a claim for ordinary unfair dismissal, an employee must usually have been employed for at least two years to be eligible to bring a claim, ending with the effective date of termination.

 

Legal risks of getting dismissals wrong

It is important to understand the law when dismissing an employee to avoid making any costly mistakes through exposure to a claim before the employment tribunal. A claim for unfair dismissal could result in an order for you to reinstate or re-engage your former employee. You could also be ordered to pay damages.

An award of damages is generally made up of a basic and compensatory award. The basic award is a fixed sum that is calculated to a statutory formula, whilst a compensatory award is used to compensate the employee for the actual money they have lost as a result of being dismissed, such as any loss of earnings.

In ordinary unfair dismissal claims these sums are capped, but can still run into tens of thousands of pounds. The awards following successful claims for certain automatically unfair dismissal claims, or unlawful discrimination, are uncapped.

You may also have to pay an award of damages in any claim for wrongful dismissal. In some cases, an employee may even opt to bring a claim for wrongful rather than unfair dismissal. By suing their employer under contractual provisions, an employee earning a high salary with a lengthy contractual notice period stands to gain more from damages for the losses flowing from any breach, potentially representing the whole of the notice period that they should have been given.

 

Need assistance?

Our HR and employment law specialists advise and guide employers on how to approach dismissals, including those concerning complex issues such as redundancies and disciplinaries. To minimise legal risks while protecting your business’ commercial interests, speak to our experts today.

 

Dismissing an employee FAQs

What makes a dismissal fair?

A dismissal will be treated as fair if an employer can identify one of the five fair reasons for dismissal, acts fairly in treating that reason as sufficient to justify dismissal in all the circumstances ‘and’ follows a fair procedure.

Can a worker be unfairly dismissed?

Only ‘employees’, rather than ‘workers’, have the right to challenge any dismissal as unfair. This means that workers cannot be unfairly dismissed, although they are protected against unlawful discrimination where, for example, a worker cannot be sacked for being transgender.

What are the 5 fair reasons for dismissal?

Under the Employment Rights Act 1996 there are five fair reasons for dismissal. These include redundancy, capability; conduct; illegality, where continued employment would contravene the law; or some other substantial reason of a kind that justifies the dismissal.

What does it mean to terminate employment?

To terminate an employee means to bring their contract of employment to an end. An employment contract can be lawfully terminated where the employer is able to show a genuine and valid reason, for example, poor performance or misconduct, and they follow a full and fair process.

How do you dismiss someone?

When dismissing someone, you must be able to show a genuine and valid reason for so doing, for example, redundancy, poor performance or misconduct. You must also act reasonably in treating that reason as sufficient for dismissal and follow a full and fair procedure.

What do you say when sacking an employee?

When sacking an employee you must tell them why they've been dismissed; when their employment contract will end; what their notice period is, if there is one; and their right to appeal your decision. You should also put these matters in writing, so that you can provide a paper trail of your decision-making process.

Last updated: 7 December 2023