Understanding the Effective Date of Termination: A Guide for Employers

The Effective Date of Termination (EDT) is a crucial concept in UK employment law, determining when an employee’s contract of employment legally ends. It impacts notice periods, redundancy calculations, and potential legal claims. This guide explains the EDT, the differences between statutory and contractual notice periods, how payment in lieu of notice (PILON) and garden leave affect the EDT, and how notice works in cases of gross misconduct.

Statutory Notice Periods vs. Contractual Notice Periods

When ending an employment relationship, employers and employees must observe the applicable notice period, which may be statutory or contractual.

Statutory Notice Periods

The minimum notice periods required by UK law are:

Employer to employee (for dismissals):
• 1 week’s notice for employees with at least one month but less than two years of continuous service.
• 1 week’s additional notice for each full year of service, up to a maximum of 12 weeks for 12 years or more.
• E.g. three years’ service, three weeks’ notice

Employee to employer (for resignations):
• 1 week’s notice, provided the employee has at least one month of continuous service.

Contractual Notice Periods

Employment contracts often specify notice periods that are longer than the statutory minimum.

Which Takes Precedence?

• The longer notice period applies.
– If the contractual notice is longer than the statutory minimum, the contractual period must be followed.
– If the contractual notice is shorter than the statutory minimum, the statutory notice period takes precedence.

Here’s an example:
• An employee with 8 years of service is entitled to 8 weeks’ employer notice (statutory) unless their contract specifies a longer period, such as 12 weeks.

Notice Periods: Resignation vs. Dismissal

1) Resignation
• Employees are typically required to give notice as per their employment contract.
• If the contract is silent on notice, the statutory minimum of 1 week applies (after one month’s service).
• Employers may agree to waive or shorten the notice period, but this must be mutually agreed with the employee.

2) Dismissal
• Employers must provide notice as specified in the contract or, at minimum, the statutory notice period.
• If dismissing for gross misconduct, no notice is required (see below).

How Payment in Lieu of Notice (PILON) Affects the EDT

When an employer terminates employment immediately and pays the employee a lump sum equivalent to their notice pay (if allowed by the contract of employment), the EDT becomes the dismissal date, not the end of the notional notice period.

For example:
• If an employee is dismissed on 1 December with a month’s PILON, the EDT is 1 December.

How Garden Leave Affects the EDT

When an employee serves their notice period on garden leave (receiving full pay and benefits but not attending work), the EDT is the final day of the garden leave period.

Notice in Gross Misconduct Cases

If an employee is dismissed for gross misconduct, they are not usually paid their notice period or any payment in lieu of notice. Gross misconduct involves behaviour that fundamentally breaches the employment contract, such as:
• Theft, fraud, or dishonesty.
• Violence or serious harassment.
• Gross negligence or serious safety breaches.

Even in these cases, a fair process must be followed to avoid claims of unfair dismissal.

Key Takeaways for Employers

1. Statutory vs. contractual notice: Always apply the longer notice period.
2. Specify the EDT: Clearly outline the EDT in dismissal or resignation confirmations, taking into account how notice is handled (worked, PILON, or garden leave).
3. Gross misconduct: No notice or PILON is required, but ensure a fair process to avoid legal disputes.
4. Check contracts: Ensure compliance with contractual notice provisions unless overridden by statutory minimums.