What is the Purpose of a Notice Period?

Every employer will have to deal with job terminations, whether through their choice or not.

When an employee leaves this way, they may be required to serve their notice period. This time frame allows both parties to end on professional terms and help plan future steps.

However, there are legal requirements which you need to meet during notice periods. If you neglect them, you could end up actioning wrongful dismissal–resulting in business damages and compensation.

In this guide, we'll look at what notice periods are, how long they last for, and how to manage job terminations properly.

What is a notice period?

A notice period is the time between an employee leaving a job and their official last day. This time period is usually outlined by the employer; and then added to contract and handbooks.

Generally, employees should give at least one week's notice if they served for one month or more.

Notice periods come under all sorts of requirements. It depends on who is serving the notice; how long they've worked for; and what their contract states.

There are three types of notice periods:

Statutory notice period

Statutory notice periods are the legal minimum amount of time needed when an employment contract is ending.

Most employees usually receive the statutory minimum notice period. They cannot receive less than one week (unless they've worked for less than a month).

Reasonable notice period

Reasonable notice periods are commonly used when employment terminations involve unwritten or implied contracts.

Here, grounds for job termination are not outlined or agreed to in writing. Instead, both parties agree on contract terms through 'reason'.

This means workers will receive a short notice period or none at all.

Enhanced notice period

Enhanced notice periods are when employees are given additional notice alongside the statutory amount. It's also known as a contractual notice period.

The specific amount is outlined in an employee's contract. And it's usually agreed to by both parties.

However, contractual notice and pay cannot be less than the statutory amount.

How much notice do employees receive?

Under employment law, employers should provide minimum notice based on the following criteria:

• Service for less than one month: No entitlement to statutory notice period.
• Service between one month and two years: A minimum of one week of notice.
• Service between two and twelve years: A minimum of two weeks' notice, plus one week for each additional year of service. (This is capped at a maximum of twelve weeks' notice). 
• Service for 12 years or more: A minimum of 12 weeks' notice.

For example, if an employee has been continuously employed for seven years, they're entitled to a minimum of seven weeks (one for each complete year).

How much notice pay will employees receive?

The amount of notice pay an employee will receive depends on individual circumstances.

Employees are entitled to normal pay during this time; this is considered the statutory notice amount. They can receive a higher amount if this has been agreed to by both parties through contracts.

If an employee's full pay varies every week, they would still get paid their normal pay during the notice period.

What is the law on notice periods in the UK?

Under UK law, every employer is legally obliged to provide a notice period to qualifying employees. The Employment Rights Act 1996 (ERA) outlines requirements for statutory notice periods.

Most employees are entitled to a certain amount of notice period before their employment contract ends. Their notice and pay are dependent on their length of their service.

What happens if you breach notice period contract terms?

There are several consequences you could meet if you breach a notice period contract term. If an employer terminates a job without offering proper notice, they could face a wrongful dismissal claim. And this is for both an employee's length of notice, as well as the pay.

If an employee believes they were denied legal rights, they could raise compensation claims for the breach. These claims are generally judged through the employment tribunal. The maximum number of damages they can award is £25,000. Or the employee could bring a civil claim where there is no cap on the compensation.

How to manage notice periods in the workplace

It's important for every employer to ensure notice periods are processed appropriately.

By doing so, you'll be able to legally comply with the contract terms, whilst ending relations on a professional note. Here are ways to manage notice periods in the workplace:

Offer a 'notice of termination of employment'

The first step an employer should take is offering a ‘notice of termination of employment’. This is usually done through writing, like a letter.

This written proof of notice provides a means of protection for both parties in case of future disputes. They should include information on terminating employment contracts, as well as:

• The reasons for terminating their job.
• The dates of the notice period and last working day.
• Any requirement to complete a handover.

Every employer should outline resignations and termination procedures in their workplace. And this should include what information is required in the letters.

Comply to statutory notice period rights

When an employee is on their notice period, they are still entitled to certain statutory rights.

For example, an employer should continue to pay regular wages and accrue statutory holiday entitlement.

Offer Pay in Lieu of Notice

Employers often provide Payment in Lieu Of Notice (PILON) during a notice period. This payment is given so employees don't need to work during their notice.

PILON helps you manage end-of-employment situations professionally–with minimum detriment.

You could face risks if you allow employees to work their notice period. For example, it could be uncomfortable for fellow colleagues. Or the employee may retain access to sensitive information which isn't suitable.

If you decide to pay PILON, it should be based on the employee’s normal wage. (Unless a contractual PILON clause states other benefits should also be included).

Remember, you can offer PILON, but you can't force it onto employees (unless contracts state otherwise).

Manage employees refusing their notice

In some cases, an employee might decide they don't want to work the notice required. If they refuse to work during this time, they could be in breach of contract. Here, refusal means an employer may claim financial compensation.

This case is the same if an employee resigns with immediate effect. Remember, if they've served for one month or more, they are required to give one week's notice. (Ideally, it would be contractual notice if it’s more than the statutory amount).

When employees don't show up for work during their notice, the outcome is entirely your decision. You can waive the requirement to provide proper notice–asking them to leave. Here, you aren't obliged to give more notice pay if they leave early. The employee can also waive their right to notice or PILON.

Do you provide notice during a dismissal?

When dismissal is involved, there are certain situations regarding notice.

An employee is entitled to statutory or contractual notice period when they've been dismissed. Unless they've been dismissed for gross misconduct, where they lose this legal entitlement.

In the case of gross misconduct, the employee may face a summary dismissal. They can be dismissed without pay or notice because their misconduct was a serious breach to contractual terms.

An example of gross misconduct which can lead to summary dismissal includes:

• Physical assault.
• Threats of violence.
• Misuse of property.
• Serious insubordination.

Every employer should show clear evidence to support summary dismissal; as well as a thorough investigation and disciplinary procedure. If you prove there was a fundamental breach of contract, these terms no longer stand as legally binding.

However, if you mistakenly dismiss an employee, they could raise a claim for wrongful dismissal. Here, you could be asked to pay lost company benefits and wages they'd receive if they worked their proper notice.

Are notice periods the same as garden leave?

In most cases, employees are usually expected to work their notice period (if PILON isn't offered). Other times, an employee's contract might include a term called garden leave.

Garden leave is when an employee is not required to work their full notice. They can either work a shorter notice period, or none at all.

Here, an employer tells them to 'stay away' from the workplace but they're still entitled to full pay, as well as other contractual benefits.

Garden leave does not end a notice period earlier than agreed to. They simply receive notice pay benefits, without having to report to work.

Get expert guidance on notice periods with Peninsula

Employers should ensure their company manages all procedures when ending employment contracts.

Employees should receive their legal benefits and rights in the most professional and appropriate way. If not, you could end up causing wrongful dismissal–leading to business disruptions and compensation penalties.

Peninsula offers expert advice on notice periods. Our team offers unlimited 24-hour HR advice which is available 365 days a year.

Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.