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What's the best strategy for managing (out) problematical employees
- 1. What’s the best strategy for managing (out) problematical employees? (1)
- 2. Introduction (2) • Recruitment slips • Managers not tackling problems • Pressure from the business
- 3. 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
- 4. 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)
- 5. 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)
- 6. Poor performance route (6) • Capability/qualification • Performance improvement plan • Setting objectives/opportunity to improve • Warnings and dismissal
- 7. 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
- 8. Redundancy/restructuring – fair process (8) • Consultation period • Suitable alternative roles • Objective selection process (not necessary when deleting specific/unique roles)
- 10. The legal principles (10) • It is for the employer to show what was the reason for dismissing the employee (s. 98(1) ERA)
- 11. 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, and b.shall be determined in accordance with the equity and substantial merits of the case”
- 12. 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
- 13. 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
- 14. 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
- 15. 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
- 16. What’s new? (16) • Nothing!
- 18. 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
- 19. 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
- 20. 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
- 21. Tax traps in termination payments (21)
- 22. 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
- 23. 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
- 24. 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
- 25. 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
- 26. 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
- 27. 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
- 28. 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
- 29. Any questions? Future topics of interest (29) Visit www.gannons.co.uk for further information
Editor's Notes
- CG Introducing Gannons
- First question – how long as employee been employed? You can go over the 2 years going through the procedures! First consider the legal principles
- Section 98(4) ERA So it’s broadly a case of being reasonable at all times – the “range of reasonable responses”
- But don’t overlook “equity and substantial merits of the case” – you can miss some procedure but still be fair or tick all the boxes and still be unfair
- The Burchell test
- Investigate – what is reasonable depends on all the circumstances. Generally if in doubt, better to err on side of caution and investigate fully. Can be good to meet employee at investigation stage to get any explanation, and to help frame the misconduct charges. Inform of issues – essential that any issue for which employee is dismissed is put to him with all the necessary evidence. Give sufficient time before meeting otherwise might be unfair. Hearing – consider WHO is to hear it. And consider who will hear the appeal. In a small company, do the best you can. No obligation to bring in external person but can be a good idea. Companion – TU rep or employee. But another companion must be allowed if reasonable. Employee says very stressed and needs support, no suitable employee, not a TU member, can he bring his brother/partner/friend? Consider saying yet even if you don’t have to. What is the downside, and it makes you look more reasonable. Inform of decision Appeal – dismissal can take effect before appeal.
- Gross misconduct – very much fact-specific and subject to reasonableness. Helpful but not determinative to have specified GM in contract/handbook. Previous warnings – can be a good idea t do formal disciplinary for non-dismissal offences to build up a history to dismiss later. Especially with a “problem employee”. To often employer’s deal with things informally and then don’t have a disciplinary record to rely on when they want to dismiss but no GM. Manager comes to HR and says fire him now. Also, non-dismissal disciplinary shows dismissal is not a foregone conclusion, can improve behaviour, can prompt the employee to leave and solve the problem!
- No real new law – but employers keep making the same old mistakes
- Dismissal after whistleblowing is NOT always unfair. For example my case – employee had warning.
- Legal obligation – generally not a breach of the worker’s own contract but could cover breach of a group’s contracts
- Can’t prevent whistleblowing – and can’t forbid it by contract. Best defence is to be able to show a different and real reason for dismissal. Could be difficult if whistleblowing happens before the reason for dismissal arises (“I really was going to begin a PIP when the employee made a disclosure”).
- Mis-labelling – eg employee is due holiday pay which is not paid but employer pays compensation. HMRC can argue that the compensation is in fact disguised holiday pay and hence taxable
- P45 and 0T – payment made after P45 taxed as if no allowances. Broadly, the lower the employee’s tax rate, the more likely he is better to be paid before P45 issued. The larger the payment, the less difference there will be.