What happens at the end of a contract?

The end of an employee’s contract can be many things. Emotional, legally costly, uneventful...

But it’s always a serious matter, which needs to be handled carefully. A dismissal or redundancy is, after all, the end of someone’s livelihood.

Yet contracts must end. The most common reasons for dismissal include the inability to do the job, misconduct, and redundancy (source: Acas). The aim for HR is to manage contract terminations well, so that outcomes are as positive as they can be.

Dismissals fair and otherwise

A big concern for employers making a dismissal is whether it will be considered unlawful — and lead to costly compensation payments. Dismissal is normally fair if an employer has acted ‘reasonably’ and has given one of five accepted reasons:

1. Lack of capability or qualifications
2. Misconduct
3. Illegality or contravention of a statutory duty
4. Another substantial reason
5. Redundancy

Unfair dismissal

However, an employee’s statutory right to not be unfairly dismissed is protected by the Employment Rights Act 1996, the Employment Act 2008 and the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011.

In an unfair dismissal claim, the onus is on the employer to show the dismissal was made for a fair, specific reason. The employee only needs to demonstrate they were dismissed.

When a dismissal is found unfair, the amount of compensation is usually based on loss of job security and immediate and future loss of earnings.

Wrongful dismissal

Often confused with unfair dismissal, wrongful dismissal occurs when an employer breaches the employment contract when terminating it. Compensation claims are usually for the payment and benefits due for the remaining contract period.

Constructive dismissal

When an employee resigns as a direct result of their employer’s actions, and those actions amount to a breach of the contract, that’s constructive dismissal. The most common reason is a breach of the implied term of ‘mutual trust and confidence’ (source: CIPD).


When an organisation or workplace is closing, or changes mean fewer workers are needed, employers can make redundancies.

Formal procedure

Redundancies can have various impacts on your organisation and the employees involved. So it’s recommended that you have a formal procedure for redundancy, which can help manage the process successfully.

Your procedure should include stages for planning, identifying redundancy candidates, seeking volunteers, consultation, redundancy selection and appeals and dismissals.

Supporting employees made redundant

Redundancy can be traumatic for employees. For employees who are staying, announcing redundancies can also negatively impact morale and productivity. So a good redundancy procedure should also include support for redundant employees, including help to find alternative employment and counselling and support.

Employees with more than two years’ service are also entitled to a redundancy payment based on a standard formula.

More about ending contracts

There’s much more to the topic of dismissals and contract terminations. Find detailed answers below, with our compliance guides, opinion pieces and other essential HR resources.

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