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10 ways to deal with resignations

When an employee takes on a role, it is not expected that they will commit the whole of their working life to their new employer – at some point they may wish to explore an external career
opportunity and try something new. For this reason, businesses should understand how to respond to an employee’s resignation and have an awareness of the legal and commercial risks that arise when someone leaves.

Here are some of the common considerations for employers when it comes to dealing with a resignation:

1. Constructive dismissal: If an employee believes that their employer has breached an express or implied term of their contract of employment it could mean that they are resigning with the intention to bring a claim for constructive dismissal. Concerns raised in the resignation letter should not be ignored to limit the risk.

2. Heat of the moment resignations: Sometimes an employee resigns during a heated argument in the workplace and then later regrets it. This is one of the exceptions to the rule that there is no right to retract notice. Provided that an employee acts promptly in withdrawing their notice, the employer would be expected to accept their change of heart.

3. Length of notice: How much notice is due from the employee will usually be set out in the contract of employment. If this is not set out in the employment contract, notice is what a reasonable period would be in the circumstances – typically this will be at least the statutory minimum of one week, often longer.

4. Tax and notice: Agreeing a shorter notice period than that set out in the contract of employment may be convenient for both employer and employee, but there could be tax consequences if there are any exgratia payments made – the risk is they will be deemed to be payments in respect of notice pay.

5. Will notice be worked? There are some occasions when keeping the employee in the business to perform a handover of their duties will be beneficial. However, there are other occasions when an employee, who is on their way out of the business, becomes disengaged and keeping them within the business will be counterproductive. In this scenario, you may wish to place the employee on garden leave or pay them in lieu of their notice. However, care will be needed to ensure that, in rushing the employee out of the door, you don’t breach the terms of the contract of employment, or even worse turn a resignation into a dismissal.

6. Paying the right notice: Paying in lieu of notice might appear a simple option, but it can be complicated assessing what wages are due. Ideally, the contract of employment will specify how to calculate the amount and whether it is limited to the employee’s basic salary. However, it may not, and compensation for the loss of other benefits such as car allowances and pension contributions will need to be taken into account.

7. When an employee refuses to work their notice: It can be a frustrating issue when an employee is so eager to start their new job, they want to cut short their notice. However, the reality is that
there are no practical ways to force someone to work their notice. At best it may be possible to claim damages for the extra costs that you have incurred as a result of them leaving early. Possibly the most effective way to deter this is to make clear that any future reference will disclose how they failed to work their notice.

8. Paying accrued holiday: An employee is entitled to receive payment in lieu of any accrued but untaken annual leave. The amount will need to be calculated by taking into account that pay for statutory minimum periods of holiday (5.6 weeks) will need to reflect the employee’s normal pay. If the employee has taken in excess of their accrued entitlement there may be a term in the contract of employment that allows you to deduct that amount from their final pay.

9. Company property: When acknowledging an employee’s resignation, remember to ensure that you identify any items of property that they currently have in their possession (such as a laptop, mobile telephone, set of keys or company car) and spell out the arrangements to make sure these items are returned. Ideally, they should be returned before the termination date.

10. Confidentiality and post-termination restrictive covenants: If the employee’s contract of employment contains a confidentiality provision and/or any post-termination restrictions, it is useful to remind the employee of these obligations in writing in the letter acknowledging their resignation before their exit from the business.