If your company is based in the U.S. and you’re accustomed to at-will employment, the United Kingdom will feel like a different world. Here, employers can't simply let someone go because the relationship isn't working out. You need a valid reason, to follow a strict legal process, and if you skip a step, you could find yourself defending an unfair dismissal claim at an employment tribunal.
For companies hiring internationally, understanding these rules matter. Get them wrong, and you're looking at compensation awards, legal fees, and the kind of reputational hit that makes future hiring harder.
Key takeaways:
- U.K. law recognizes five valid reasons for fair dismissal: conduct, capability, redundancy, statutory restriction, and "some other substantial reason." But having a valid reason isn't enough on its own. You also need to follow a fair process.
- However, certain dismissals, such as those related to pregnancy or whistleblowing, are automatically unfair from the start of employment.
- Statutory notice periods start at one week and increase with the length of service, up to a maximum of 12 weeks. Check your employees' contracts, though, as many specify more extended notice periods.
Legal Grounds for Employee Termination in the U.K.
Before you dismiss anyone in the U.K., you need a legally acceptable reason. ACAS, the government-backed workplace advisory service, outlines five potentially fair grounds:
- Conduct: Behavioral problems, from persistent tardiness to serious misconduct like theft or violence. If the conduct is severe enough to count as gross misconduct, you may be able to dismiss without notice, but you still need to conduct an investigation first.
- Capability: When someone genuinely can't do the job, whether because they lack the necessary skills or a long-term health condition prevents them from working. Before proceeding to the dismissal process, however, you're expected to attempt to help them improve or make reasonable adjustments.
- Redundancy: The role itself is disappearing because the business is closing, relocating, or needs fewer people doing that type of work.
- Statutory restriction: Continuing to employ someone would be in violation of the law. Think of a delivery driver who loses their license or a worker whose visa has expired.
- Some other substantial reason (SOSR): A broad category that covers situations like business reorganizations or irreparable breakdowns in working relationships.
Sometimes more than one reason applies. Document the reasons you're relying on to justify the termination, and why.
Fair vs. Unfair Dismissal
Having a legal reason to dismiss someone only gets you halfway there. U.K. law also requires you to act in a reasonable manner. This means thoroughly investigating, giving the employee a genuine chance to respond, and treating similar situations consistently across your organization.
Employees generally need two years of continuous service under their belt before they can bring an ordinary unfair dismissal claim. But here's where it gets complicated: certain dismissals are automatically unfair regardless of how long someone has worked for you.
Automatically unfair reasons include dismissals connected to:
- Pregnancy or maternity leave
- Whistleblowing (reporting wrongdoing under the Public Interest Disclosure Act 1998)
- Asserting statutory employee rights, such as minimum wage or holiday entitlement
- Trade union membership or activities
- Health and safety concerns
- Taking time off to care for dependents
For these categories, employees don't need to have two years of service. They're protected from their first day on the job.
So, where do employers go wrong? They rush the investigation. They treat one employee more harshly than another for the same offense. Or they make up their mind before giving the person a chance to explain.
Notice Periods and Severance Pay Requirements
GOV.UK establishes the statutory minimums: employees with one month to two years of service are entitled to one week's notice. After that, it's one additional week for each year worked, capped at 12 weeks for employees with 12 or more years of service.
But don't assume you’re only required to provide the statutory minimum. Check your employment contract. Many roles, especially senior ones, specify notice periods of three months, six months, or even longer. Whichever figure is higher applies.
Garden leave keeps someone on the payroll during their notice period, while requiring them to stay at home and refrain from performing any work. They're still employed, still getting paid, and still bound by their contractual obligations. Companies often use this when the departing employee has access to sensitive information or key client relationships.
Payment in lieu of notice (PILON) allows you to terminate the employment immediately by paying out the amount the employee would have earned during their notice period. One important detail: your employment contract should explicitly allow for PILON. Without that clause, paying someone off instead of letting them work their notice could technically breach the contract.
The exception to all of this is gross misconduct. If someone commits a serious offense, such as theft or violence, you can dismiss them immediately without notice. But "gross misconduct" doesn't mean you can skip the disciplinary procedure — you still need to investigate first and follow a fair process.
Procedural Steps for a Compliant Termination
The ACAS Code of Practice is your benchmark. Employment tribunals look at whether you followed it, and they can increase compensation awards by up to 25% when you haven't.
What does a compliant termination process look like in practice?
- Investigate the issue and document your findings before taking any action.
- Put the concerns in writing and invite the employee to a formal meeting.
- Share evidence in advance so they can prepare a response.
- Hold the meeting, and allow them to be accompanied by a colleague or union representative.
- Make your decision and communicate it in writing, providing transparent and fair reasons.
- Offer an appeal, handled by someone who wasn't involved in the original decision.
- Keep records of everything. If the case goes to tribunal, you'll need them.
The common thread here is fairness. Give people a genuine opportunity to respond, consider what they have to say in their own defense, and don't rush to conclusions.
Redundancy-Specific Requirements
Redundancy is a valid reason when the work itself is disappearing, not when you want to replace one person with a different person. If you're hiring for the same role immediately after letting someone go, that's not redundancy, and calling it that will create problems.
When you're planning 20 or more redundancies within 90 days at a single location, you trigger collective consultation requirements. You'll need to consult with union representatives or elected employee reps for at least 30 days (45 days if you're making 100 or more people redundant). You also need to notify the government's Redundancy Payments Service, and failure to do so may result in fines.
Even for smaller numbers, you should consult individually with affected employees. Discuss with them how to avoid redundancies, minimize the impact, or find alternative roles within the company.
Your selection criteria need to be objective. Skills, poor performance, and attendance are fair game, but be cautious with attendance records, as disability-related absences shouldn't count against someone.
Employees with two or more years of service qualify for statutory redundancy pay. The calculation factors in age, length of service, and weekly pay, although weekly pay is capped at GBP 719 (as of April 2025), and the maximum total payout is GBP 21,570.
Protected Characteristics and Discrimination Risks
The Equality Act 2010 lists nine protected characteristics:
- Age
- Disability
- Gender Reassignment
- Marriage and Civil Partnership
- Pregnancy and Maternity
- Race
- Religion or Belief
- Sex
- Sexual Orientation
Direct discrimination means treating someone worse because of a protected characteristic.
Indirect discrimination happens when you apply a policy that looks neutral on paper but puts people with a particular characteristic at a disadvantage.
Here's what makes discrimination claims particularly risky for employers: there's no qualifying service period. An employee can bring a claim on their first day of employment. And dismissing someone because of pregnancy, maternity leave, or even making a flexible working request is automatically unfair, full stop.
If a termination touches on any protected characteristic, even if only tangentially, seek reputable legal advice before proceeding.
Settlement Agreements
Sometimes, both sides agree that parting ways makes the most sense for everyone involved. A settlement agreement lets the employee waive their right to bring tribunal claims in exchange for a financial package and other terms (like an agreed-upon satisfactory reference).
For the agreement to be legally enforceable, the employee must receive independent legal advice, typically from a solicitor; however, a union representative may also provide guidance. Employers usually cover or contribute to the cost of that advice.
Standard terms typically cover the compensation amount, confidentiality clauses, agreed-upon reference wording, and how the departure will be communicated. There are limits to what you can include, though. You can't ask someone to waive pension rights they've already earned or claims they are not aware of.
Final Pay, Benefits, and Documentation
When employment ends, you need to ensure that the final payments are correct. That includes salary through the last day, accrued but unused holiday pay, any bonuses or commission owed, and statutory redundancy pay, if applicable.
Don't forget the administrative side: notify benefits providers, recover company property, revoke system access, and issue the P45 (the document showing tax code and year-to-date earnings). Send written confirmation of the termination that covers the reason, the effective date, and a breakdown of final payments.
Post-Termination Restrictions
Many employment contracts include clauses that extend beyond termination, such as non-competes, non-solicitation of clients or colleagues, and confidentiality obligations.
U.K. courts do not automatically enforce these. The restriction must extend no further than necessary to protect a legitimate business interest. A blanket 12-month non-compete covering an entire industry? That's probably too broad. A six-month restriction limited to direct competitors in a specific region? More likely to hold up.
Common Termination Mistakes to Avoid
The errors that land employers in tribunal tend to follow a pattern:
- Skipping or rushing the investigation
- Not giving the employee a chance to explain their side of the story
- Vague or shifting reasons for the dismissal
- Ignoring how protected characteristics might be relevant
- Getting notice periods or final pay calculations wrong
- Cutting corners on redundancy consultation
- Forgetting required paperwork, such as the P45
- Refusing to let employees be accompanied to formal meetings
Most of these mistakes result from the same underlying issues: moving too fast and not following a fair process.
How an Employer of Record Supports U.K. Termination Compliance
When companies employ workers internationally without establishing local entities, an Employer of Record (EOR) takes on the legal employer role. That includes handling terminations in line with local law.
In the U.K., employment contracts need to spell out termination policies, notice requirements, and grounds for dismissal from day one. An EOR ensures that those contracts meet current requirements and remain compliant as the law evolves.
When it's time to end an employment relationship, the EOR manages the process, ensuring:
- Proper procedures are followed
- All proper documentation is provided
- Final pay calculations are accurate
This takes employment law complexity off your plate. You focus on managing your international team members; the EOR handles the legal details.
RemoFirst helps companies employ talent in 185+ countries while staying on the right side of local regulations. Book a demo to see how we support global teams from onboarding through offboarding.
