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How to Fire an Employee

By: Dave Howell - Updated: 11 Sep 2012 | comments*Discuss
Employee Dismissals Sacking Employees

Part of being an owner of a small business is dismissing an employee when this becomes unavoidable Dismissing a member of staff is never an easy task, but you have to comply with regulations to ensure that you are not breaking the law, and that you are not unfairly dismissing your employee.

Ending Employment

It is important to understand that you can layoff employees without actually dismissing them if your business is going through a bad patch. Or you can terminate an employment after a fixed time if this was clearly stated in the original contract of employment. Both these scenarios are not the complete dismissal of an employee, but it's a good idea to ensure that the contractual terms of each of your employees is clear and concise on their contract of employment to avoid any misunderstandings.

Wrongful Dismissal

This is usually defined as breaking the agreed rules that govern the dismissal process. Wrongful dismissal can be claimed if an employee is going through a disciplinary or grievance procedure that could result in their dismissal. It's important that you always abide by the rules laid down in your disciplinary and grievance procedures to avoid this kind of dismissal complication as this could result in your business being taken to a tribunal.

Fair and Unfair Dismissal

As an employer you must understand what constitutes a fair and more importantly an unfair dismissal. Note that independent contractors or self-employed people who work for you can't normally use a tribunal if they wish to contest an unfair dismissal.

If you want to dismiss an employee you must have good grounds to do so. If their conduct, the quality of their work, or their capability to carry out their duties has eroded over time, you would have grounds for a fair dismissal. Remember that it's the law to have in writing your business's disciplinary and dismissal procedures. You must at all times follow your procedures as failing to do so could be understood as a wrongful dismissal. More information about fair and unfair dismissal is available on the BERR website: http://tinyurl.com/2pcmrn.

Employment Tribunals

If an employee believes that they have been unfairly dismissed, they can take their grievance to an employment tribunal. You can read more about tribunals on the Employment Tribunals website: www.employmenttribunals.gov.uk.

From an employers point of view it is crucially important that you have clear grounds for a dismissal, and that you have followed the correct procedure during the dismissal process. The tribunal if they find in favour of your employee will most likely impose a level of compensation and may direct you to reinstate your employee. You can read more about grievance and dismissal on the ACAS website: www.acas.org.uk/index.aspx?articleid=890.

After Dismissal

You have a number of responsibilities to your employee after you have dismissed them:
  1. Tax and National Insurance
    When your employee leaves you need to complete their P45 form. This is the form they take to their next employer as it details their current tax position. You also need to complete form P11 that records for your business's records the tax that your former employee has paid.
  2. Tribunal awards
    If you have been given an order by an employment tribunal to pay your employee any compensation, or you must reinstate them the money that you have been ordered to pay is treated as gross income for tax purposes. You should work out the tax that your employee owes on this money in the same way as their usual salary.
  3. Keeping records
    You must keep a record of the events that surround any dismissal that takes place in your business. There is no statutory rules regarding how long you keep these records, but they could be useful if an ex-employee returns to your business as an applicant for a future vacancy. Also, if your dismissed employee requests a written reason for their dismissal, you must provide this within 14 days.
  4. References
    It is common practice for a previous employer to give a reference when an employee leaves. If you dismissed that employee for misconduct for instance, a reference may not be appropriate. Also, if you do not disclose on a reference any events that an employer should know about could lead to legal action by the new employer. You can get around this issue by not issuing a traditional reference, but just giving the new employer a document that confirms that their potential new employee did indeed work for you over a specific time period.

Dismissing an employee must at all times be handled professionally to avoid any legal action that could take place. Ensure you have a clear disciplinary procedure within your business, and also act in a fair way when you have to dismiss one of your employees.

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