Whether you choose to remove a senior employee, or they choose to leave your business, you will be looking to minimise any negative impact on your business, below is some advice to assist you.
- Why is it important to manage senior employee exits well?
- Advice on ending a senior employee’s contract
- What if a senior employee has not chosen to leave and has outstanding claims or grievances against my business?
- Understanding and enforcing a senior employee’s restrictive covenants
- Practical considerations on the exit of a senior employee
- Communications about a senior employee’s exit
- How to manage the transition after a senior employee leaves
- How to minimise impact on remaining employees
- Do I need to recruit and replace straight away?
Why is it important to manage senior employee exits well?
The negative impact on your business can be serious if a senior employee’s exit is managed poorly, and so preparing for this eventuality will place your business at a significant advantage. If a senior employee is leaving for a reason connected to your business and is making allegations against your business, whether or not what the employee says is true, this could seriously impact your business’ reputation, client and public profile. It is advisable to manage this situation swiftly before knowledge of any allegations become public. Further, if a senior employee is demotivated or disgruntled, whether for a reason connected with your business or not, this may lead to loss of focus, poor productivity and supervision as well as a general culture of negativity in the workplace, which again, would be advisable to deal with promptly to minimise disruption. If managed well, a senior employee exit can mean a positive external brand ambassador for your business, who has respect for you and your business and potentially allows for that employee to return at a later date, saving you time and money on recruitment.
Advice on ending a senior employee’s contract
This will of course depend on the specific circumstances and for bespoke advice you should contact a specialist employment solicitor, but to ensure consistency and a well-thought-through approach it is advisable to have a policy setting out how you will deal with senior exits in your business. If you would like assistance in drafting this to suit the needs of your business, specialist advice from the outset is recommended. In particular, a plan should be put in place for unexpected departures, as notice periods can seem short, particularly if there is a lot to hand over to an internal or external replacement, and your business could be disadvantaged if key information leaves with the senior employee.
It is critical that whatever the reason for the senior employee leaving, communication remains clear and professional and that, so far as possible, the employee feels appreciated for their service and leaves with a positive feeling about your business. Inexpensive gestures such as a leaving party, gift or card can assist with this. More formal exit interviews can also assist with allowing you and the employee to discuss any remaining points of disagreement and deal with practical matters, such as return of property and reminders about social media profiles being updated to reflect the employee is no longer employed by you.
If there is likely to be some resistance to the exit, as you are removing the employee, you may want to consider offering them a settlement agreement to minimise future employment claims against your business, re-state post termination restrictions and to protect confidential information relating to your business and details of the exit of the employee.
What if a senior employee has not chosen to leave and has outstanding claims or grievances against my business?
As with any staff member working for your business, a senior employee should have access to a clear, written grievance procedure. Good communication internally can prevent a formal grievance from being lodged and can save your business time and resources. But if a formal grievance is raised, your grievance procedure will need to be followed carefully and consistently. If a grievance cannot be resolved it will be for you to decide as to whether you would like to offer to settle any potential claims under a settlement agreement or defend the claims in an Employment Tribunal if the employee pursues their complaints further. Whichever approach you decide to take, seeking specialist legal guidance at an early stage is advisable to help you assess the potential risk to your business of a senior employee exit and how to minimise it.
Understanding and enforcing a senior employee’s restrictive covenants
One of the most important considerations when a senior employee exits your business is the knowledge they have and damage they could do with that knowledge if they were to join a competitor, solicit or deal with your clients and suppliers or poach your other senior staff. For this reason, most employment contracts or director service agreements will contain restrictive covenants or post termination restrictions. It is critical that these post termination restrictions are reasonable and go only as far as is required to protect the legitimate business interests of your company. See our article on restrictive covenants in employment law for more information.
If you are concerned with protecting restrictive covenants contained in your employee’s contract of employment, you will need to ensure that if you are terminating an employee’s contract, that you do not do this in breach of the contract’s terms. This might sound obvious, but if incorrect notice is given and so there is a wrongful dismissal, for example, this is a repudiatory breach of contract and means that your employee is then free from any terms intended to survive beyond termination of employment, including post-termination restrictions. This does not apply to an unfair dismissal. However, if an employee claims that there has been constructive unfair dismissal and the employee resigns in response to your repudiatory breach, and if there has been such a breach, the contract will no longer be binding on the employee and the post termination restrictions will not be enforceable. Further, an employee does not have to resign - where the employee claims the employer has committed a repudiatory breach of their contract, if this is later discovered and there is a breach, any remaining terms will not continue to bind the employee from the point of discovery of the breach. If you are unsure about whether there has been a repudiatory breach or would like bespoke assistance on whether your post termination restrictions are likely to be enforceable against an employee, our employment solicitors can assist with this.
Settlement agreements can be helpful if you are concerned about post termination restrictions of an outgoing employee, as the restrictions can be re-stated and agreed again.
Practical considerations on the exit of a senior employee
Whether a senior employee has chosen to hand in their notice, or you have served notice on them, it can be difficult to keep that employee motivated and productive for the rest of their time with your business. It may be that you have the option in the employee’s contract of employment of paying in lieu of notice for at least part, if not all, of the notice period, which should be considered and used if beneficial to your business in the circumstances.
If you require work or projects to be completed or handed over before the employee leaves, it is advisable to agree with the employee what can reasonably be finished and handed over in detail, during the employee’s notice period. You will need to have an appreciation of all the tasks that individual performs to ensure that nothing is missed. A job description may be a helpful starting point, but the employee may go above and beyond this, and it may well be out of date if the employee has a long period of service with your business. If you do not believe that having the employee in the office as a physical presence is beneficial in the circumstances, you may want to consider a period of paid garden leave for the employee during their notice period if there is a risk that they may disrupt or demotivate the rest of the team, but you can ensure during this time that they can be contactable to answer any queries during office hours.
You will also want to consider final practical details such as the return of company property, including confidential information and company documents, and ensuring that the employee has collected all their personal belongings. It is also advisable to ensure that all passwords to documents and hardware have been obtained from the employee before their termination date, which should then be changed.
If a senior employee is a director and/or shareholder you will have further considerations, such as the resignation of the director and notification at Companies House and the transfer of shares to deal with. If you would like assistance with any of this, our company lawyers can help.
Communications about a senior employee’s exit
It is crucial that without breaching confidentiality, and so far as is possible, you keep the rest of the team in the loop about what is happening. Rumour and anxiety surrounding workplace changes can be an unwelcome distraction from staff focusing on performing their roles effectively. High visibility of the remaining senior management is key, and a culture of open communication can help reassure and support staff members in the exiting employee’s team.
Once an employee’s departure has been discussed and finalised with the outgoing employee, where possible there should not be a delay in communicating the departure internally, and externally if appropriate. You may wish to agree the wording and timing of an announcement with the employee, which may also form a schedule to a settlement agreement, should you wish to enter into such a document as part of the employee’s exit.
As part of the wider communications relating to an employee’s exit you should also consider making amendments to organisation charts, internal documents, websites and phone lists, once the changes to personnel are finalised. The exiting employee should also be advised to update their social media profiles to reflect that they are no longer a part of your business from their termination date and work emails should be diverted after that time.
How to manage the transition after a senior employee leaves
Whilst leadership risk and succession planning should be regularly reviewed, this is rarely top of the priority list for most businesses whilst they are running well. However, after careful consideration, senior replacements can be put in place quickly and minimise disruption to your business. It may be that your succession planning has paid off and there is somebody who has worked closely with the outgoing employee who is able to be promoted and has a full appreciation of the work the exiting employee did, in which case the transition will be a smooth one. The employee should be familiar with the role, systems, personnel and location.
However, it may be that you are required to recruit from outside of a department or external to your company, which will usually mean a more challenging transition. If the situation is amicable and a new employee has been recruited, it might be beneficial for the new employee to shadow the outgoing employee whilst they serve their notice. If this is not possible or desirable, the outgoing employee should provide a full handover in writing and in good time before their termination date, and be available until the end of their notice period to clear up any enquiries the incoming employee or remainder of the team have.
An exit interview is also a useful tool, particularly if it is led by someone impartial to the exit process and management of the individual leaving. This should be an opportunity for the exiting employee to provide honest feedback about the role and working environment, which can then be used to make any required changes to avoid recurrence of senior employee exits.
How to minimise impact on remaining employees
In terms of the remaining team, clear and early communication will be key in reassuring employees about their own roles and in keeping them updated about why the outgoing employee is leaving and about who the replacement will be. A primary point of contact for any questions or concerns can be helpful as is positive messaging about how the departure provides an opportunity to build a new team and improve some areas of the business which may have remained the same for some time.
Do I need to recruit and replace straight away?
This will depend on the role of the senior employee you are looking to replace. It may be that the role is very niche and so it will be difficult to find a replacement. It may be that you can recruit short term contract cover whilst you find the correct candidate, which has the advantage that the fixed term contract becomes permanent if the individual suits the role, having fulfilled the fixed term contract. If the role requires specialist training which will need to take place before the employee starts work, you may look to start the recruitment process sooner rather than later. Alternatively, as already discussed, you may be able to promote one or more of your existing staff to fill the role. For more information on recruiting the right replacement, see our article 'Finding and retaining senior staff'.
In the short term, whatever the role, if the employee is not serving their notice, it will be important to share out the parts of the role that can be covered amongst the remaining team and ensure that work is not missed. This also has the advantage that you can effectively decide whether to recruit a replacement, change the duties and hours of the role, or if a restructure of your team can absorb the work left by the outgoing employee. If there is a cost saving to the business, this will need to be managed carefully with the remaining team. If the remaining employees feel that they are taking on more work for no reward they may also be tempted to leave. You may want to consider an incentive for those employees, depending on the circumstances.