Dismissing Staff and Redundancies

Fadumo IsmailFadumo Ismail
Last updated on:
December 9, 2022
Published on:
July 26, 2022

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When an employee is dismissed, the employer has effectively terminated the employee's employment contract. In the UK, a dismissal must be fair and the employer must act reasonably and be balanced and objective in deciding whether to dismiss an employee. 

What are some common reasons for a fair dismissal? 

The standard of fairness at the centre of the legal right to claim unfair dismissal regulates the employer's exercise of their disciplinary power, including the power to dismiss employees. Under the Employment Rights Act 1996, there are five potentially fair reasons for dismissal: 

  • Capability or qualifications: where the health or capabilities of an employee are inadequate and leave the employee unfit to do a particular job, or the employee's academic, professional or technical qualifications do not enable the employee to carry out their duties to a sufficiently high standard. 
  • Poor conduct: this may be a single act of serious misconduct or a series of acts of misconduct e.g. the employee is consistently late to work or behaves inappropriately. 
  • A legal reason or contravention of a statutory duty: for example, this may include a role that requires employees to drive, and an employee is no longer able to do so legally. 
  • Redundancy: the role ceases to exist and there is a reduced requirement for employees to carry out particular tasks,
  • Some other substantial reason: this encompasses a variety of potential fair dismissals that would not fall into any of the other categories, but could justify the dismissal. 

When an employee has been dismissed, they will sometimes raise a claim for wrongful or unfair dismissal. This claim could potentially reach the employment tribunal. 

Was the dismissal reasonable? 

Despite an employer's reliance on a potentially fair reason in dismissing an employee, it is down to the Tribunal to conclude whether a dismissal was reasonable. This involves two considerations: 

  • Whether proper procedure was executed appropriately by following disciplinary rules and procedures reasonably and if so,
  • Whether the decision to dismiss was not beyond what a reasonable employer would have done. 

What counts as unfair dismissal? 

Employees, but not workers, have a statutory right not to be unfairly dismissed under Section 94 of the Employment Rights Act 1996. Even when an employee has committed a serious act of gross misconduct and is found guilty, employers must still carry out a thorough investigation for the dismissal to be classed as fair. Though there is no legal definition of ‘reasonableness’, employment tribunals still have wide discretion on what is considered to be reasonable and ‘fair’. 

If an employee believes the reasons they were dismissed were unfair, they might be able to challenge their dismissal. In the UK, there are several protected activities, conditions, characteristics and employee rights for which an employee cannot be dismissed. Dismissal on any one of these grounds is automatically considered unfair. 

These grounds include: 

  • Making a flexible work request
  • Pregnancy and maternity (including maternity leave)
  • Family leave including paternity and adoption leave and time off for dependants
  • Membership of a trade union 
  • Taking part in industrial action for 12 weeks or less
  • Acting as an employee representative 
  • Doing jury service 
  • Being a whistle-blower
  • Compulsory retirement (unless employers can objectively justify it) 
  • Asking for a legal right, such as the National Minimum Wage
  • Acting or proposing to act on a health and safety issue

What is a fair disciplinary procedure?

If an employer does not follow full and fair procedural steps prior to making the dismissal, an employee may have a case for unfair dismissal, even if that employee was dismissed for a valid reason. Employment tribunals may insist that fairness of standards requires for example, that the employer give the employee an opportunity to explain themselves and the alleged misconduct or a chance to improve their performance before any dismissal takes place. 

In the event that an allegation of misconduct has been made against an employee, the employer must carry out an investigation that produces evidence of the misconduct. The employer must then be able to show that the thorough investigation led to a reasonable belief that the employee committed the offence in question, and that the decision to dismiss was reasonable in the circumstances. The relevant circumstances include the gravity of the charge and any potential ramifications on the employee’s reputation and their ability to continue working in their chosen field.

With regard to matters relating to the poor performance of an employee, employers may need to consider the matters that are beyond the employees’ control. The issue of poor performance may be a result of poor leadership and management, or defective work systems. Remedies must be put in place to give the employee a chance to improve their performance. As such, a claim that an employer failed to follow a thorough and fair procedural process prior to a dismissal is by far the most likely ground for a successful claim of unfair dismissal. 

In order to balance the interests of employers and employees, there is a qualifying period of continuous service. The right to not be unfairly dismissed generally arises only when the employee, by the date of termination, has been employed for at least two years of service. The statutory qualifying period creates an interval of two years for employers to exercise their disciplinary power of dismissal unrestrained by legislation and oversight. 

What are the penalties for unfair dismissal?

The penalties for unfair dismissal primarily aim to ensure that employers comply with the standard of fairness established by legislation which should prevent unfair dismissals. Another objective of sanctions for unfair dismissal sets out that an employee who has been unfairly released from their employment contract, should be properly compensated.

If an employer has been found by an employment tribunal to have unfairly dismissed an employee, the employer may be ordered to reinstate or re-engage the employee. Reinstatement requires the employer to give the employee their job back with full pay in all respects as if the employee had not been dismissed. Re-engagement requires the employer to re-employ the employee on such terms as the tribunal may decide and in a different job that is comparable to the one the employee was dismissed from.

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What is constructive dismissal?

Constructive dismissal can be said to have occurred when an employee resigns because an employer breaches one of the important terms of the employment contract. The employer's actions must amount to a fundamental breach and the employee's resignation must be because of this breach. 

This includes: 

  • An unpleasant/dangerous working environment
  • Bullying, harassment or discriminatory treatment which an employer fails to address or resolve
  • Cutting wages without notice or agreement 
  • Unfairly increasing the employee's workload 
  • Changing the location of the employee's workplace with little notice 

The most common breach that could see an employee claim constructive dismissal is breach of the implied terms of 'mutual trust and confidence' between an employee and employer, thus leading to a claim for wrongful dismissal. 

What counts as wrongful dismissal?

Wrongful dismissal involves contract law and can be said to have occurred when an employer terminates the employee’s contract, and in doing so, breaches the contract, thus not providing contractual or statutory notice period. An employer may also breach the notice requirement by failing to pay the employee all or part of their wages due during the notice period. This is because most employment contracts explicitly specify an agreed notice period which must be given when an employee leaves. There is no minimum length of service requirement for an individual to claim wrongful dismissal, even where a notice period is not specified in an employment contract.

An employer whose dismissal of an employee fails to comply with the notice provisions contained in a contract, typically sees an employee only able to claim damages for the breach of contract for the wrongful dismissal.

What is a redundancy?

Redundancy is a specific term and form of dismissal that relates to the termination of an employment contract because an employer needs to reduce the size of the workforce. This may be because the employer has become insolvent, the business may be sold to a new owner or the business may be under significant reconstruction due to the changing market conditions and technologies. 

What counts as dismissal for redundancy? 

An economic dismissal may allow a claim for redundancy pay or payment for unfair dismissal, or both. The first point to consider would be whether or not the dismissal falls within the statutory idea of redundancy. If so, the employee will be eligible for redundancy payment. However, employees may also claim that the dismissal was unfair, which may arise if only part of the workforce is being made redundant. If so, employees have the right to challenge the selection criteria which may be regarded by a tribunal as subjective, unreasonable and possibly discriminatory. This can be evidenced by an employer's failure to follow a fair procedure of consultation prior to the dismissal or carries out an unfair selection process in relation to only a few employees, and seems to favour other employees. If the economic dismissal does not fall within the concept of redundancy and the employee does not qualify for compensation, the employer must seek to justify the dismissal on the basis of ‘some other substantial reason’ that proves the dismissal was reasonable. 

Employers are required to consult individual employees and give them notice within a reasonable period of their impending redundancy and collective consultation must be completed before notices of dismissal are issued. The employer should give a written statement to those selected for redundancy to inform them that they are at risk of redundancy. 

All employees should be allowed to challenge the redundancy decision. 

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The opinions on this page are for general information purposes only and do not constitute legal or financial advice on which you should rely. 

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