How to Dismiss an Employee Properly: Procedure for Employers under UK Labour Law

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Миколаєнко Олена Василівна

Attorney

United Kingdom / England

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Publication date: 15.09.2025

Dismissing an employee in the UK requires careful adherence to UK employment law to avoid unfair dismissal, legal action and financial loss. The correct procedure takes into account the employee's legal status, dismissal rules, employee rights, as well as aspects such as national insurance, minimum wage and working hours. This article details the steps for employers, including the specifics of probationary periods, employment contracts, and job offers, while the Consultant Legal Marketplace offers employment advice to develop a clear course of action. Our services will help you fulfil your obligations as an employer and protect your business from legal risks.

According to the Employment Rights Act 1996 and updates to the Employment Rights Bill 2025, from 2027, employees will receive day-one rights to protection against unfair dismissal, but during the probationary period (up to 6 months), a simplified ‘lighter-touch’ procedure will apply. For employees with 2+ years of service (until 2027), employers must justify dismissal, for example, due to misconduct, capability or redundancy. Employers' responsibilities include providing written reasons for dismissal, especially for protected categories such as pregnant women or employees on maternity leave. For self-employment, the rules for dismissal are less strict, as it is not an employment contract, but clients must comply with the terms of the agreement.

National insurance and PAYE are withheld until the end of the notice period, which depends on working hours and length of service (1 week per year, maximum 12 weeks). For example, an employee with 5 years' service is entitled to 5 weeks' notice, unless otherwise specified in the employment contract. A job offer that includes clear terms and conditions helps to avoid disputes when terminating employment. Incorrect dismissal can lead to claims to the Employment Tribunal, where compensation in 2025 can reach £115,115 for unfair dismissal.

Main Reasons for Lawful Dismissal

• Misconduct: Breaches like absenteeism or gross misconduct (theft, violence) allow summary dismissal without notice.
• Capability: Poor performance or prolonged illness, but requires a fair process with warnings and improvement plans.
• Redundancy: Job cuts, requiring consultation (2 weeks for 20+ employees) and transparent selection criteria.
• Statutory ban: Legal prohibition from working, e.g., losing a driving licence for a driver.
• Other substantial reason: For instance, conflict of interest or refusal to accept new contract terms.

Employers must assess legal work status (employee, worker, self-employment) as it affects employee rights and procedure. For workers on zero-hours contracts, notice periods may be minimal, but minimum wage (£12.21/hr from April 2025) and rest break rights remain.

Steps for a Proper Dismissal Procedure

1. Review Employment Contract: Check terms, including probation period (3–6 months), where dismissal is simplified, but from 2025 requires "lighter-touch" process.
2. Initial Investigation: Gather evidence (e.g., absence records or client complaints) and hold an informal discussion if the issue is minor.
3. Disciplinary Meeting: Arrange a formal meeting, provide evidence, allow a companion (colleague or union rep).
4. Written Decision: State reasons, notice period, and right to appeal; for redundancy, consultation is at least 2 weeks.
5. Appeal Process: Conduct an appeal meeting with an independent manager; if unfair, tribunal may award compensation.
6. Final Payment: Pay minimum wage, holiday pay, redundancy pay (for 2+ years’ service), and withhold PAYE and National Insurance.

Employment advice from Consultant helps avoid errors, especially for self-employment, where job offer excludes employee rights. For instance, the Supreme Court ruled drivers as workers, not self-employed, granting them minimum wage and notice rights.

Risks and How to Mitigate Them

Improper dismissal can lead to severe consequences, such as Employment Tribunal claims. In 2025, 80% of claims involve unfair dismissal due to procedural failures. From 2027, day-one rights will increase claims, making employer obligations for fair process critical.

• Financial Risks: Compensation up to £115,115 for unfair dismissal or discrimination.
• Reputational Damage: Negative employee reviews can harm the company’s brand.
• Legal Costs: Tribunal cases cost £5,000–£20,000 depending on complexity.

Employment advice from Consultant helps assess legal work status, review employment contract, and ensure a fair procedure. For workers on zero-hours contracts, employee rights like rest breaks every 6 hours apply, while employees are entitled to redundancy pay (1.5 weeks’ pay per year after age 40).

Questions and Answers

Tips for Employers

Verify Legal Status: Confirm if the employee is an employee, worker, or self-employment to apply correct dismissal rules.
 

Adhere to UK Labour Law: Follow fair procedure to avoid tribunal claims.
 

Seek Employment Advice: Contact Consultant for guidance on employment contract and dismissal rules.
 

Calculate Payments Correctly: Include PAYE, National Insurance, minimum wage, and holiday pay in final settlement.