Dismissals and Termination of Employment in the UK

A claim for unfair dismissal can be made if the reason for dismissal was not one of the five specified ‘fair reasons’ Those reasons are (i) conduct, (ii) capability, (iii) "some other substantial reason", (iv) statutory ban, and (v) redundancy.

Most employees need a particular length of service to bring a claim for unfair dismissal. At present this is two years’ service. However, all employees can bring a claim for unfair dismissal regardless of their length of service if the reason for dismissal is deemed to make the dismissal automatically unfair (e.g. for whistleblowing, making a flexible working request, or for family related reasons such as an employee’s pregnancy or the fact that they have taken maternity or parental leave).

Even if there is a fair reason for a dismissal, to avoid a successful claim for unfair dismissal an employer must still follow a fair procedure and act reasonably in dismissingan employee.

If the reason for a dismissal involves discrimination against the employee (because of a protected characteristic such as sex, race, age or disability), the employees can bring a discrimination claim against their employer irrespective of their length of service.

Employees with at least two years' service have the right to request a written statement of reasons for dismissal. Employers must provide the statement within 14 days of the request.

Irrespective of length of service, employees dismissed during pregnancy or statutory maternity or adoption leave are automatically entitled to a written statement of reasons for dismissal without having to request it.

The two-year qualifying period for unfair dismissal is set to be removed in 2026 meaning that an ordinary unfair dismissal claim will become a ‘day 1 right’. The right will, however, be subject to an exception where the dismissal is for a certain reason and made during a statutory probationary period.

Employees may be dismissed orally or in writing. In misconduct and capability dismissals the Acas Code of Practice on disciplinary and grievance procedures states that an employee should be invited to attend a meeting to explain their version of events (where they are entitled to be accompanied by a colleague or an appropriate trade union representative). A letter should then be sent to confirm the reason for the dismissal and the date of dismissal in writing to avoid any dispute over the effective date of termination. A right of appeal should be offered. Failure by an employer to follow the Acas Code of Practice does not give an employee a standalone remedy for breach. However  , where an unfair dismissal claim succeeds and there has been an unreasonable failure to comply with the Code employment tribunals have the power to increase any compensation awarded by up to 25%.

There is a statutory minimum notice period of between one and 12 weeks, dependent on length of service.

 A  contract of employment can provide for a longer notice period.

Failure byan employer to comply with the statutory or contractual notice period (whichever is longer) can result in a claim for ‘wrongful dismissal’.

A contract of employment often provides for an employer to make a payment in lieu of notice, for example, equal to the salary that the employee would have earned during the notice period, in order to terminate employment without requiring an employee to work their notice period.

There is no general legal requirement for involvement of employee representatives in dismissals, but staff forums may be involved in collective redundancy situations (see below).

Trade unions are not normally involved in dismissals other than in the case of collective redundancies (see below) or if the employee exercises their right to be accompanied by an appropriate trade union representative to a disciplinary meeting.

Not necessary.

If 20 or more employees are proposed to be made redundant at one "establishment" (e.g. a site or shop) within a period of 90 days or less, consultation with employee representatives (who may be trade union representatives) must begin at least 30 days (or 45 days if 100 or more employees are proposed to be made redundant) before the first dismissal takes effect.

Additionally, employers are obliged to notify the Secretary of State where they are proposing to dismiss as redundant 20 or more employees within a 90-day period.

The Secretary of State must receive notification via an HR1 form at least 30 days (or 45 days if 100 or more employees are proposed to be made redundant) before the first dismissal takes effect. Failure to file an HR1 form in time or at all can give rise to both corporate and personal criminal liability.

A copy of the notification must also be provided to the employee representatives.

The ‘establishment’ test is set to be removed in 2026 so that the requirements to collectively consult and to notify the Secretary of State will apply where an employer is proposing to make 20 or more redundancies across its business.

Summary dismissal (dismissal without notice or pay in lieu of notice) is only lawful where an employee has committed a breach of contract that is sufficiently serious to entitle their employer to treat the employment contract as terminated with immediate effect. A typical example is where an employee has committed gross misconduct.

An employee may have various claims, such as an unfair dismissal claim where the primary remedy is financial compensation. However, there is also scope for a claimant to request reinstatement or re-engagement, and in very limited circumstances (e.g. whistleblowing)  interim relief. If an employment tribunal grants interim relief, then an employer must continue paying the claimant's wages until the date of the substantive hearing. Most employment-related claims in the UK are made in employment tribunals.

An employee may receive a payment in lieu of notice if the contract of employment contains a relevant clause (see ‘Notice period’ above). If an employee with at least two years’ continuous service is made redundant, they will be entitled to a statutory redundancy payment. The amount is calculated according to a statutory formula based on the employee’s age, length of service and weekly pay (capped at GBP 700 as at April 2024), up to a maximum of GBP 21,000 (as at April 2024). The employment contract may provide for an enhanced redundancy payment.

If the employee has been unfairly dismissed, and brings a successful claim in an employment tribunal they may receive a ‘basic award’ calculated according to the same formula as the statutory redundancy payment (but employees cannot usually recover both a statutory redundancy payment and a basic award), and a ‘compensatory award’ which is capped at the lower of one year’s salary and GBP 115,115 (as at April 2024). If an order for reinstatement or re-engagement is made there is scope for this cap to be lifted.

Employees who argue that they were dismissed for making a protected disclosure (whistleblowing) are not restricted by the statutory cap referred to above.

Similarly, the statutory cap does not apply where the dismissal was related to a prohibited ground under the Equality Act 2010. In these situations, the potential awards can be significant.

Post-termination restrictive covenants (which include non-compete clauses) will be void for unlawful restraint of trade (and therefore unenforceable) unless they protect the legitimate business interests of the employer and go no further than is necessary to provide that protection, in terms of activity, duration and geographical area. Non-compete clauses and other post-termination restrictive covenants are widely used in senior level contracts. It is always recommended to take advice on tailoring such covenants for each individual employee and to ensure that when employees are promoted or their role changes that the restrictions are suitably updated.

Employers may wish to avoid a potential dispute over a termination of employment by obtaining a waiver of rights from an employee under a settlement agreement in consideration for a non-contractual termination payment. In the UK there are a number of statutory formalities to include before a settlement agreement is enforceable in respect of statutory rights, including a requirement that the individual takes independent legal advice on the terms and effect of the agreement. There are risks attached to making an offer to an employee to enter into a settlement agreement and therefore legal advice should be taken before doing so. There are certain limitations on the use and enforceability of confidentiality provisions in settlement agreements or ‘non-disclosure agreements in the UK. 

In the (UK, the rights and obligations of a ‘director’ are the same whether they are for a ‘managing director’ or any other type of director. However, not all directors are employees. ‘Managing directors’, for example, are employees of the company, but ‘non-executive directors’ do not tend to be employees. Normal practice is for a managing director to have a service agreement supplementing their statutory and common law obligations as a director. Often a managing director's service agreement will require them to resign any directorships when their employment terminates, so that their directorship and employment terminate simultaneously. It Isis therefore often simpler (and preferable) to remove a managing director by dismissing them from their employment, and then requiring them to resign their directorship. Please see the section "Employees: United Kingdom" for information on the relevant issues when taking that approach, as well as the "Miscellaneous" section below.

This section only covers removal of a director from office as a director and does not cover termination of any contract of employment or other employment issues.

A company may remove a director for any reason, unless the articles of association of the company or any other agreement between the director and the company provide otherwise. There is however a statutory procedure that the shareholders of any UK company can use to remove a director (see below). This procedure will apply regardless of any agreement between the company and the director, or any provision of the company's articles.

Section 168 of the Companies Act 2006 gives shareholders a mandatory right to remove a director by ‘ordinary resolution’ (i.e. a simple majority of the shareholders attending and voting) at a meeting. This right applies notwithstanding any other agreement between the director and the company, or any provisions in the articles to the contrary.

The resolution will be of no effect if passed in writing instead of at a meeting. At least one of the shareholders must give at least 28 clear days’ notice in writing to the company before the meeting of an intention to move the resolution. On receiving that notice, the company must forward the notice of the resolution to the director concerned and call a general meeting of the company to vote on the resolution. The director has the right to be heard at the meeting and to make written representations.

While they cannot prevent section 168 from applying, the company's articles of association or shareholders' agreement may contain provisions that make it difficult in practice to remove a director or provide that they can be reinstated. The company's articles of association and shareholders' agreements should therefore be checked before considering taking this route.

A company's articles of association may set out additional (and usually less complex or time-consuming) bases on which a director can be removed. For example, the 'Model Articles' under the Companies Act 2006 set out circumstances that trigger the automatic removal of a director, including that they are prohibited from being a director by law or a bankruptcy order is made against them. Some companies' articles of association also allow the directors to remove another director by majority vote, for example. A company’s articles should be reviewed for any such procedures if removal of a director is contemplated.

Removal as a director is immediate unless otherwise specified in a company’s articles of association .

No involvement.

No involvement.

Not necessary.

Not applicable.

No special rules apply.

The removal of the director is void.

A director may be entitled to a payment under the terms of any service agreement (for example a payment in lieu of notice), or as an employee under statute (for example a statutory redundancy payment).

Sections 215 to 222 of the Companies Act 2006 contains special rules relating to compensation given to a director for their loss of office. Such compensation requires shareholder approval, except for certain payments that are made in good faith such as payments made in discharge of a legal obligation, or to settle a claim arising from loss of office or termination of employment.

Post-termination restrictive covenants (which include non-compete clauses) may be included in any service agreement. However, they will be void for unlawful restraint of trade (and therefore unenforceable) unless they protect the legitimate business interests of the employer and go no further than necessary to provide that protection in terms of the activities covered, duration and geographical area.

A director may also be subject to post-termination restrictive covenants contained in other agreements such as a shareholders’ agreement, or (depending on the reward structure) share plans such as LTIPs (Long Term Incentive Plans).

Regulated and listed companies should also be mindful of any obligations they may have under their regulatory rules and/or the rules applicable to their market listing. These rules are likely to limit the terms on which such companies can reimburse a director in connection with their removal from office or employment and can also subject a company to reporting obligations.