Ending employment: notice, final pay, references and the paperwork

Notice

The statutory minimum from the employer is one week after one month's service, then one week for each complete year up to twelve. From the employee it is one week after one month, whatever their service. The contract can give more, and usually does for salaried roles; the longer of statutory and contractual applies. No notice is due from the employer for a dismissal for gross misconduct. During notice the employee is entitled to their normal pay, including for a period of sickness, holiday or family leave falling within it, where the contractual notice is not more than a week longer than the statutory minimum.

Pay in lieu of notice and garden leave

If the contract has a pay in lieu of notice clause, you can end the employment immediately and pay the notice period as a lump sum, taxed as earnings. If it does not, paying in lieu is technically a breach of contract; the employee is unlikely to complain about receiving the money, but any post-termination restrictions in the contract may fall with the breach. Garden leave keeps the employee employed and paid through the notice period but away from work and customers, which protects the restrictions; it needs a clause too.

Final pay

The final payslip covers:

• Pay to the last day, including any overtime, commission or bonus earned.
• Pay in lieu of notice, if applicable.
• Accrued untaken statutory holiday, calculated to the last day, at the normal remuneration rate. Contractual holiday above the minimum follows the contract.
• Expenses owed.
• Statutory redundancy pay, tax-free, where applicable.
• Less lawful deductions only: tax and National Insurance, pension, court orders, and anything the contract or a prior written agreement allows (overtaken holiday, training costs on a sliding scale, an outstanding loan). Nothing else, including unreturned property, unless the contract says so.

Documents

A P45 as soon as possible after the final pay run, sent to the home address or made available electronically. Any pension scheme leaver information. A letter confirming the last day and the final pay breakdown. If the employee asks for written reasons for dismissal and has two years' service (or was dismissed while pregnant or on maternity leave, regardless of service), you must provide them within 14 days; the dismissal letter usually already does.

References

There is no general duty to give one, but if you do it must be true, accurate and fair. A factual reference (dates, title, duties, reason for leaving as recorded) is the safe default and most employers' policy. A glowing reference for someone dismissed for dishonesty can make you liable to the new employer; a damning one for someone who resigned can make you liable to them. Same policy for everyone: refusing a reference to one person can be victimisation.

Settlement agreements

A settlement agreement is a contract under which the employee gives up specified statutory claims in return for a payment. It is only binding if it is in writing, relates to particular claims, and the employee has received independent legal advice from a named adviser (whom the employer usually pays for) with insurance. An Acas-conciliated COT3 does the same job without the legal advice requirement. Use one where there is a genuine risk of a claim; do not use one to avoid running a process you should have run.

Retirement

There has been no default retirement age since 2011. An employee retires when they choose to; an employer cannot require it without an objectively justified retirement age, which very few can show. Conversations about "future plans" with older workers should be the same conversations you have with everyone. A dismissal connected with age is discrimination.

Post-termination restrictions and confidentiality

Confidentiality obligations continue after employment for genuinely confidential information. Non-compete, non-solicitation and non-dealing clauses are enforceable only if they protect a legitimate interest and go no further than reasonably necessary; the resignation letter should remind the employee of them. Government has proposed limiting non-competes to three months; check the current position before relying on a longer one.

The admin this guide describes, done for you

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