What’s the best strategy for managing (out) problematical

employees? (1)

Introduction (2)

• Recruitment slips• Managers not tackling problems• Pressure from the business

Probationary periods (3)

• Termination subject to appropriate notice• Statutory minimum notice (S86 (1) Employment Rights

Act 1996 (ERA1996)) Less than 2 yrs (but 1 month or more) 1 week At least 2 yrs but less than 3 yrs 2 weeks At least 3 yrs but less than 4 yrs 3 weeks At least 11 yrs but not less than 12 yrs 11 weeks …12 or more yrs 12 weeks• Contractual notice

Dismissing employees under the 2 year mark (4)

• Generally, employees need 2 yrs’ service to bring unfair dismissal claims

• Terminate subject to appropriate notice• Beware of whistleblowing/ discrimination

claims • Employee can take minimum statutory

notice into account in getting over 2 yr period (S97 (2) ERA1996)

Dismissing after 2 yr mark (5)

• Establish a fair reason and follow a fair process (S98 (1), (2) and (4) ERA1996)

• Capability or qualifications • Conduct• Redundancy• Contravening the law• Some other substantial reason (SOSR)

Poor performance route (6)

• Capability/qualification • Performance improvement plan• Setting objectives/opportunity to improve• Warnings and dismissal

Time for restructuring? (7)

• Redundancy – dismissal due to (i) actual or intended closure of the business (ii) the actual or intended closure of the workplace where the employee was employed or (iii) diminished requirements of the business for employees to do work of a particular kind (S139 (1) ERA1996)

• SOSR – reorganising the business

Redundancy/restructuring – fair process (8)

• Consultation period• Suitable alternative roles• Objective selection process (not

necessary when deleting specific/unique roles)

Conduct dismissals (9)

The legal principles (10)

• It is for the employer to show what was the reason for dismissing the employee (s. 98(1) ERA)

The legal principles (11)

“the determination of the question whether the dismissal is unfair (having regard to the reason shown by the employer)a.depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a significant reason for dismissing the employee, andb.shall be determined in accordance with the equity and substantial merits of the case”

The legal principles (12)

• Tribunal must consider whether employer has acted in a manner reasonable employer would have acted

• Tribunal not to put itself in position of a reasonable employer

• Range of reasonable responses test applies to investigation as well as to decision to dismiss for misconduct

• Fairness judged on facts as known at time

The test for fairness (13)

• Misconduct dismissal only fair if:– The employer believed the employee to be

guilty of misconduct– The employer had reasonable grounds for

believing the employee was guilty of that misconduct

– At the time it held that belief, it had carried out as much investigation as was reasonable

ACAS Code (14)

• Investigate the issues• Inform the employee of the issues in

writing• Conduct a disciplinary hearing• Inform the employee of the decision in

writing• Give a right of appeal

Standard of misconduct (15)

• Gross misconduct– So serious it goes to the root of the contract,

i.e. repudiatory, entitling employer to dismiss with immediate effect

– Deliberate and wilful breach or gross negligence

• Less serious but follows previous warnings

What’s new? (16)

• Nothing!

Whistleblowing (17)

Increasing popularity (18)

• Dismissal is automatically unfair if the reason, or principal reason is because the employee made a protected disclosure

• As always, the Tribunal must decide the reason for dismissal

• A strong reason for not giving the employee a warning or procedure if less than 2 years

Qualifying disclosure (19)

• Must, in the reasonable belief of the worker that it is in public interest show– Criminal offence– Breach of a legal obligation– Miscarriage of justice– Danger to health and safety– Damage to environment– Deliberate concealing of information re above

Protect yourself (20)

• Get in first• Document the reason for dismissal• Have a whistleblowing policy

– Less likely worker will make external disclosure and less likely to be protected if they do

Tax traps in termination payments (21)

The date of termination (22)

• Identify the correct date of termination• Check the contract for PILON terms• Backdating a termination date does not

work– And neither does backdating the notice period

The £30,000 tax free sum (23)

• Sum payable as compensation for termination of employment can be tax free up to £30,000

• BUT only if not chargeable to tax for some other reason

Earnings, benefits etc (24)

• Anything which is earnings or benefits is taxable

• Anything contractual is taxable (unless genuine redundancy payment)

• Payments to retain employees until termination

Pay in lieu of notice (25)

• Contractual PILON – taxable• Automatic PILON – taxable probably• Discretionary PILON – taxable unless

employer elected to terminate breach (may be difficult to prove/persuade HMRC)

• PILON as damages for loss of notice - £30k exemption available– Refer to as compensation not PILON

Traps (26)

• Restrictive covenants and confidentiality – always taxable – provide for specific consideration

• Redundancy not effective immediately – could be taxed as reward for staying

• Discrimination – injury to feelings tax free unless related to termination of employment (but unclear case law)

• Mis-labelling

Traps (27)

• Legal costs – under a settlement agreement directly to solicitor but can’t recover VAT (deductible for CT)

• Outplacement – only if at least 2 years’ service and generally available to class

• Restrictive covenants and confidentiality – unenforceable if terminated in breach

• Take care in labelling all payments

Traps (28)

• Foreign service exemption• Timing – taxable at earlier of time payment

is in fact made or it is due to be made (can provide not to be paid before e.g. 6 April, but employer could be liable for damages if early)

• P45 and 0T tax code• CWG2

Any questions?Future topics of interest (29)

Visit www.gannons.co.uk for further information