Last reviewed 13 April 2017
Bob Patchett looks at what notice terms should feature in a contract of employment, what factors to consider and what is likely to suit particular circumstances and views.
The law requires that someone who has been employed for a month must be given a written statement setting out the terms and conditions of his or her employment. This information may be incorporated into a contract of employment. Usually great care is taken to set out the duties, salary and important benefits such as company car, but little attention is given to the length of notice to terminate employment, probably because it offers no immediate benefit or obligation. This is poor management because employment ends usually by one of the parties giving notice and either may be inconvenienced by the length of the notice stipulated by the contract.
In common law either party has to give reasonable notice, but in more recent times statutory law has stipulated that, after one month of service, employees are entitled to a minimum of one week’s notice per year of service to a maximum of 12 weeks. Conversely, employees are required to give only one week. The contract of employment may set out longer periods for either party, subject them to being no less than the statutory provision. If, for example, a contract provides a one-month notice period, then for the first four years of the person’s service the employer must give one month of notice, rising after five years to five weeks, the next year to six weeks and so on to the maximum of 12 weeks. The only exceptions to these arrangements are if the employee is dismissed for gross misconduct or the contract is frustrated because, for example, the place of work is burned down. Those situations end the contract immediately.
Either party who fails to receive due notice is entitled to seek redress at law. If the employer fails to give proper notice, the employment tribunal would require the employee to be paid what he or she would have received had the employment been terminated correctly, therefore, if other payments are made at the time of dismissal, make clear what part represents the amount due for the notice period. The employer is entitled to sue an employee who leaves without giving due notice but this has rarely been worthwhile because courts usually assume that the employer is able to fill the resulting vacancy quickly and, as a result, may award nominal damages. This is an important factor to consider when setting the length of notice that an employee must give.
Common practice is to follow tradition and set the length of notice according to the seniority of the employee, for example, shop floor workers’ one week of notice, junior staff one month, senior staff three months, and six months or more for top executives. In other words, length of notice reflects perceived status and more senior employees generally expect this. However, length of notice should reflect a more important consideration — what would you wish to happen when this person’s employment comes to an end?
Usually if you give someone notice to terminate employment for whatever reason, he or she is no longer required and therefore continued presence in the workplace is unnecessary and perhaps even an embarrassment. This suggests therefore the shortest possible notice period. Assuming that termination does not call for summary dismissal, then the shortest periods are those specified in statute law, giving a maximum of 12 weeks for people with 12 years of service. Thus, for the employer, the ideal length of notice would be three months for even the most senior employee. But this might affect the ability to recruit. People engaged in senior positions may feel insulted if they are not given in their contract what they consider to be an appropriate termination period, especially if they are already on something longer. Nevertheless this is an option for you to consider, therefore if you wish to impose an unexpectedly short notice period, make it part of the negotiation process. If the salary, the car if appropriate, and other benefits are sufficiently generous, the employee may well accept this arrangement rather than have other benefits reduced.
But establishing the length of notice that the employee is required to give is more complicated. On one hand you may want the employee out of the way as quickly as possible because you consider that he or she is a liability, might work less productively, might be a bad influence on other employees, might do damage and might glean information to take to the new employer. That is quite a number of “mights”, so you should consider realistically which of them are likely and which are emotional reactions to perceived treachery. Even during a notice period an employee should work normally and in reality most do. An occasional reminder to do so may be called for, but otherwise employees tend not to behave treacherously while working their notice. Nevertheless if the employee’s presence is not required, you could ask him or her to leave immediately with a payment in lieu of the unworked notice period, or tell the person to stay away from work on full pay, on what is known as “garden leave”, provided that the period is not too long. This anxiety to part company with the employee as soon as possible suggests a short notice period that, as described above, may prove difficult to impose on recruitment.
On the other hand you may want a long period of notice in order to hang on to the employee who is doing important work, is part way through a critical project, or because you anticipate that recruitment of a replacement will take a long time. You need to accept the reality that employees, especially those in great demand because of their skills and experience, are likely to leave if better job opportunities come their way, therefore you should take steps to minimise the damage this could do to your organisation. One way is to treat key employees well, pay them a good salary, give them flexibility in their work and offer them opportunities to broaden their skills and develop their career with you. Another is to ensure that if any key employee leaves — or just drops down dead — someone else in the organisation is adequately trained to step in and do the job to at least an adequate degree. Consider, however, that an employee who gives notice is probably going to a better paid job and will therefore be anxious to leave as soon as possible, therefore the longer the period of notice you require of the employee, the greater the chance that he or she will break it.
Two final considerations are, first, the notice periods may be different for each party, as they are in statute law. Second, as in statute law, you could increase the length of notice for senior staff incrementally, say three months in year one, six months in year two and the full period of notice thereafter.
So, there really is no ideal length of notice. You need to consider the factors outlined above and determine what is likely to suit your particular circumstance and views. Disregard status and tradition, make sensible decisions and apply them — if necessary by negotiating the terms you want.