The end of an employee’s contract can be a difficult time, so it needs to be handled with care.
The aim is to manage contract terminations well, so the outcomes are as positive as they can be. You still need to be professional and follow the correct process for ending a contract.
It’s also important to follow the correct legal process, avoiding wrongful terminations and unfair dismissal claims.
This guide will explain how to end a contract, the reasons for it, and how to abide by the law in the process.
How to Terminate a Contract
Both you and your employee can decide to end their contract. The termination of a contract can be done by an employee resigning or if you dismiss an employee.
From time to time, employees will leave your business. They may choose to quit their job for several reasons.
Ensure you follow the correct resignation process. This can help you avoid unfair dismissal claims or disputes in tribunal hearings.
A big concern for employers making a dismissal is whether it will be considered unlawful.
You need to consider many types of dismissal at the end of a contract. Some of them are unlawful, so ensure you adhere to the correct process for each one.
A fair dismissal means you have acted reasonably, and have given one of the following reasons under The Employment Right Act 1996:
- Conduct: for inappropriate behaviour.
- Capability: when an employee isn’t able to do their job or has the wrong qualifications.
- Redundancy: when their job is no longer needed.
- Legality reason: when they cannot legally do their job.
- A substantial reason: could be for a fixed-term contract ending.
An unfair dismissal is when an employee’s contract is ended without a valid legal reason, such as:
- The reason may have been unfair.
- The reason given for dismissal wasn’t true.
- An employer acted unreasonably.
- The proper procedure wasn’t followed by the employer.
Wrongful dismissals occur when an employer breaches the contract when terminating it. This is often confused with unfair dismissal.
Compensation claims are for the payments and benefits due for the remaining contract period.
When an employee resigns as a result of their employer’s actions, this leads to a breach of contract.
The most common reason is a breach of implied terms. In this case, mutual trust and confidence have been lost between employer and employee.
When your business or workplace is closing or changes mean fewer workers are needed, you can make redundancies.
Redundancies can have various impacts on your business and the employees involved.
So, you should have a formal procedure in place for redundancies, and provide employees with their legal rights and entitlements.
Your formal procedure should include stages of the following:
- Planning and selection.
- Seeking volunteers if needed.
- Consultation with employees.
How to support redundant employees
Redundancy can be stressful for employees. But for those who are staying, announcing redundancies can also impact morale and productivity.
So, a good redundancy procedure should include support for those made redundant. This can include help to find an alternative job and counselling.
End of Contract Notice
If an employee is leaving or has been dismissed, it’s important to know what their notice period is. This will allow you to plan and give your business more control over the situation.
If an employee gives notice, you must accept their resignation. You also must agree in writing their last working day.
Even if there’s no written contract, employees must be given reasonable notice when their employment ends.
Can a Contract Be Broken?
Yes, contracts can be broken. It can be breached by both employee and employer for many reasons.
It can occur if one party does any of the following:
- Refuses to do their part.
- Does something breach the code of conduct.
- Prevents you from doing what you’re supposed to.
Fixed-term contracts are a good way to hire workers for a limited time.
They are generally used for covering employees when they take certain types of leave, such as parental leave, sick leave, and seasonal employment.
These types of contracts will come to end, usually when the agreement and date have been reached.
Fixed-term contracts can be useful for employers, as they eliminate the need to dismiss an employee or the option for resignation.
Manage the End of Contracts with BrightHR
When it comes to the end of a contract, you need to ensure you’re being fair and following the law.
If you neglect your employees’ rights, you could be discriminating against them. This could lead to costly compensation payments and legal tribunal hearings.
BrightHR can provide you with expert advice on ending contracts. If you need any help on how to manage your employee’s contracts, don’t hesitate to get in touch with one of our experts.
Book in a free demo or give us a call on 0800 783 2806
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