This page is all about notice periods in employment contracts by Hatton James Legal, employment solicitors in Birmingham.
How much notice should an employer give?
An employment contract may give the bare statutory minimum entitlement (zero notice for the first month, then one week’s notice for the first two years, then one extra week per year’s service after that, to a maximum of 12 weeks.
This is called ‘summary dismissal’ and if challenged, this is called a wrongful dismissal claim (there is no length of service minimum to bring this employment tribunal claim). If an employer wants to rely on restrictive covenants it should be sure that its summary dismissal will stand up to scrutiny by an employment tribunal.
Contracts can contain more generous notice periods than this, but not less.
For example, an employee with three years’ service whose contract of employment gives one month’s notice must be given the statutory notice of three weeks.
How much notice should the employee give?
Again, it depends on the contract but the statutory minimum is one week’s notice for employees who have been in employment for at least a month, which doesn’t increase. An employment contract will usually give a longer notice period.
Can the employer make a payment in lieu of notice to end the employment sooner?
This is often confusing for people. Employment lawyers use the terms “payment in lieu of notice (PILON)” and “payment of damages for not being given notice”. There is an important legal distinction between these ideas, which both involve replacing the notice period with money.
If the contract has a clause permitting a PILON, an employer can send the employee home, pay the notice pay (taxed) and the contract’s work and salary clauses end but the confidentiality and some other clauses continue. So for example an employee on almost 2 years’ service won’t get that important 2 year mark.
If there is no PILON clause, paying to end the contract early breaches the contract. The payment can be made free of tax. The contract still ends early but this time due to breach and the confidentiality and restrictive covenants don’t continue. Often an employer doesn’t care but sometimes this is a big unexpected effect.
Employers often get the distinction wrong, leaving the employee in a better legal position in some respects.
What if there is no provision for a payment in lieu of notice in the employment contract?
An employer could put the employee on garden leave, if the contract of employment allows it (the employee stays bound by the terms of the employment contract but doesn’t come into work during the notice period).
Or the parties agree on an earlier termination date with a compensation payment. There is no breach of contract if the employee agrees to this.
Or the employer bites the bullet and pays compensation instead of notice.
Does annual leave accrue during the notice period?
The position is fairly complicated but some leave does accrue – maybe not all. It can be fiddly to calculate. An employee can take any remaining leave during the notice period and an employer can direct this to happen too.