You may be aware that employees generally only qualify for redundancy payments after completing at least two full years of service. With this in mind, is it possible to just dismiss any employee with less than two years’ service without legal repercussions?
What does the law say about dismissing an employee with less than 2 years’ service?
Whilst the general rule is that an employee does not qualify for unfair dismissal rights until they have attained two years of continuous service, there are exceptions to this rule.
The biggest exception is where a dismissal is automatically unfair. This is where they are dismissed in violation of specific employment law rights (which are summarised later on in the article).
If the main reason for dismissal is or is connected with the employee's membership of the reserve forces, there is no qualifying period of service required for it to be found unfair.
Similarly, where the reason or principal reason for the dismissal is, or relates to, the employee's political opinions or affiliation, the fairness of the dismissal will be judged in the usual way but there is no qualifying period.
Even if an employee does not qualify for any unfair dismissal rights, it does not mean that they have no entitlement to bring other employment claims, which do not have the same service requirements such as for breach of employment contract or discrimination (which have no minimum service length requirements). The law does not simply say that employees can be dismissed and have no employment rights if they have less than two years’ service.
What is the notice period and pay entitlements for an employee who is dismissed with less than two years’ service?
You must still abide by the terms of an employee’s employment contract even if they have less than two years’ service, to avoid a claim for breach of contract or wrongful dismissal.
The outgoing employee is entitled to the longer of their contractual or statutory notice period and pay. The contractual notice might be longer, but if the contract does not set out the notice period and the employee’s employment has been over one month and less than two years, their statutory notice will only be one week.
The notice pay should be paid in full unless there is a very good reason not to do so.
If there is a payment in lieu of notice clause you may be able to make use of this to bring forward the date on which the employee’s employment is to terminate, but you will still be required to pay the employee in full for their notice in accordance with their contract to avoid the risk of a successful wrongful dismissal claim being brought against your business.
What are the common pitfalls I should be aware of when dismissing an employee with less than two years’ service?
As mentioned above, there are some dismissals which are deemed to be automatically unfair and additional protection is provided in those circumstances, for which a qualifying period of service is not required. For example, if you dismissed an employee for: a reason connected to pregnancy and maternity; asserting any statutory rights, such as the right to annual leave or the national minimum wage; for making a protected disclosure relating to your workplace; or for raising a health and safety concern, the reasonableness of the dismissal or procedural fairness would not be considered, the dismissal would simply be automatically unfair.
If you are found guilty of automatic unfair dismissal of an employee, an employment tribunal could order your business to reinstate or re-engage the employee and your business will likely also be ordered to pay both a basic and a compensatory award of damages to the dismissed employee. If an employee was dismissed or selected for redundancy for carrying out health and safety activities or for whistleblowing, there is no upper limit on the compensatory award, but there is a statutory cap on compensation which applies to all other automatic unfair dismissals.
If you dismiss an employee because of a protected characteristic (age, sex, race, religion or belief, disability, pregnancy and maternity, gender reassignment, sexual orientation and marriage and civil partnership) this could be unlawful discrimination. If there is a risk that dismissal might involve one of these protected characteristics it is prudent to seek advice first from an employment solicitor.
It is worth having an open conversation with the employee about issues such as absences, before taking action to dismiss, in case other actions such as reasonable adjustments for a disability should instead need to be considered. It is possible to still dismiss if there is a protected characteristic at play, but caution must be exercised. It could be an expensive error if a dismissal is discriminatory, as there is no cap on compensation for lost earnings in discrimination claims and an award for injury to feelings can also be made.
There is a temptation for employers to act more impulsively where employees have under 2 years’ service, but this could lead to claims being raised which are likely to be costly in terms of financing representation and potentially compensation, administration time and negative PR. Also, it could lead to mistakenly dismissing employees who have been misunderstood who could be supported with training or a little more time and which could then become real assets to your business. Probation periods and the extension of these, along with performance improvement plans, if required, can be helpful tools to see if an employee is able to make the required improvements before being dismissed. If the employee can turn things around this is likely to be less expensive in recruitment and training costs.
An employee with less than two years’ service is entitled to have the terms of their employment contract abided by. If there is a contractual policy relating to the reason the employee is being dismissed, this must be followed, regardless of length of service to avoid a claim for breach of contract. It may be that you have a flexible and non-contractual dismissal procedure, but even if that is the case it may be important to be consistent to reduce risk and avoid potential claims of discrimination or automatic unfair dismissal in some cases. As discussed above, all contractual notice periods and notice payments will stand as per the contract, save for in the case of clear gross misconduct.
After an employee has been employed for over one month they will have a statutory entitlement to notice. As detailed above, for employees with under 2 years’ service this entitlement is one week’s notice. An employee can rely on this period of notice to make up their service to two years for the purposes of bringing an unfair dismissal claim in circumstances where they have been dismissed within a week of them attaining 2 years’ service, either without any notice or a payment in lieu. Therefore, where you wish to terminate an employee before they reach 2 years’ service, you should ensure that the termination is effected before they have attained 1 year and 51 weeks’ service.
How can I minimise the risk of automatic unfair dismissal claims?
The obvious way to reduce the risk of automatic unfair dismissal claims is to follow the same fair dismissal procedure for those with less than two years’ service as you would for an employee with longer service, this is particularly the case where risk factors have been identified. This procedure should include: formal meetings where the employee can choose to be accompanied; investigations; clear written evidence of the reasoning for any dismissal, following a consistent and non-discriminatory process; confirmation of dismissal in writing; and offering the employee the right of appeal against their dismissal. Following the ACAS Code of practice on disciplinary and grievance procedures is recommended, as well as abiding by your own internal procedures. If you would like a procedure updating or drafting, our employment lawyers can help with this.
Right at the beginning of the employment relationship ensure that you communicate clearly with employees about what is expected of them in their role. A thorough induction process and clear targets and feedback on behaviour and performance at regular intervals informally and formally during a probation period will all ensure that both parties have what they need and know where they stand. Having this open communication should help to prevent a successful claim being made, even if a dismissal is required.
In conclusion, an employee with less than two years’ service does not qualify for ordinary unfair dismissal rights but they may still be able to make a claim for automatic unfair dismissal, discrimination and/or breach of contract and so caution is advised before you dismiss any employee. Where there are risk factors such as protected characteristics, or if automatic unfair dismissal might be arguable, it is particularly prudent not to rush and to seek legal advice, before taking action to dismiss an employee.
Following a full and fair procedure for all employees and having open communication with staff throughout their employment with you, is likely to reduce the chances of your business having to defend employment claims.