Whilst most HR professionals would always seek to dismiss ‘fairly’ (in both the lawful and moral senses), in reality, the ability of an employee to bring an unfair dismissal claim is relevant a lot of the time – to decisions about dismissal, how to dismiss, and when.
In most cases, to bring a claim of unfair dismissal, an employee needs two years’ continuous service. So many would think that as long as the individual’s employment ends before they’ve reached that two year mark, it’s fine to dismiss without having to worry about claims (assuming there is not a risk of discrimination or another automatically unfair reason for which the two year requirement doesn’t apply).
But that’s not quite true. In fact, in practice termination may need to be sooner than that, and there are two common misconceptions here. The first one is the mistaken belief that if you have the right to pay in lieu of notice, it doesn’t matter that the employee’s notice period would have taken them over two years, as long as their employment physically ends by the time two years is up.
The second misconception is that the right to PILON makes no difference, the argument being that you have to add the employee’s contractual notice period (say, a month) and if that would have taken them over two years, the employee can claim unfair dismissal.
In fact, neither of those is true. To claim unfair dismissal an employee needs two years’ service at the Effective Date of Termination (EDT). The EDT is not necessarily the actual date their employment ends. If you terminate without giving at least the statutory minimum notice of a week, that week gets added to the actual termination date, for the purposes of working out what the EDT is. If you terminate with immediate effect at a few days before the two year anniversary, the fact you’ve paid in lieu of notice will not help you, as their EDT for these purposes will be past two years.
A longer contractual notice period doesn’t matter – if they are entitled to a month’s notice, the whole month doesn’t get added. So if you terminate with immediate effect three weeks before the two year anniversary, and the employee would have been entitled to a month’s notice, they will not be able to bring a claim.
Obviously encouraging managers to pick issues up promptly will help avoid the problem in the first place, but if you have managers who tend to cut things a bit fine, remember that if you terminate and PILON just before the two year mark, you may find the employee could still bring a claim, as statutory notice would have taken their EDT past two years.
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