We have written before about offboarding employees when employment ends. However, we are frequently asked about options regarding working notice periods and final pay so here’s the low down on notice.
Employees should be giving notice to tell you in advance when they want to leave their employment to give you chance to prepare for them leaving. The length of the notice period and any requirements, for example submitting notice in writing, is usually in the employment agreement. It is common to have different periods of notice in different circumstances. During a trial period, or in the case of dismissal following a performance or disciplinary process, a shorter notice period may be more suitable. Fixed-term agreements may have a notice period or a set date when employment will end.
Where there is no notice period in an agreement, you should discuss and agree what is fair and reasonable. Factors such as the employee’s role, seniority and workplace norms should be considered. (Then contact us to help you with agreements that comprehensively cover this! As we always say, prevention is better than cure.)
Accepting Resignations
If an employee has resigned verbally, it’s a good idea to get them to put it in writing the date they propose to finish. Check their employment agreement to make sure that they have given the right amount of notice. Whilst accepting a resignation request is not a formal requirement – you can’t stop an employee from leaving at the end of their notice period – we strongly recommend that you take a step and formally do so.
Heat of Moment Resignations
It’s not uncommon for upset employees to say they’re leaving, for example during a disciplinary investigation. Previously it has been risky to accept resignations in that situation in case they raised a personal grievance, claiming constructive dismissal. However, whilst we still recommend acting with caution if a resignation is potentially in the heat of the moment, recent decisions of the Employment Court have indicated that employers do not have to allow a cooling-off period before considering an employee’s resignation. This is particularly true if other staff were witness to the resignation.
In Mikes Transport Warehouse Limited and Vermuelen [Nov. 2021], Chief Judge Inglis noted “….an employee is not required to justify their decision to resign .. nor does the decision need to be demonstrably sensible or well thought through.”
If an employee resigns but later changes their mind and wants to withdraw their resignation, you have the right to either allow the withdrawal, or not, i.e. the resignation will still stand.
Not working notice periods
Employee request
There are several reasons why an employee might want to end their employment and you may negotiate the notice period terms to suit their specific needs. Common requests from employees include waiving the notice period entirely or working for only part of the notice period. However, you don’t have to agree if the request is unreasonable or detrimental to your business.
If you agree to waive all or some of their notice period, the employee won’t be paid for the portion of notice period they don’t work.
What about when an employee doesn’t give the required notice period? There are two actions you can take. Firstly, you can get reimbursement for the financial loss suffered due to the lack of sufficient notice and deduct the amount from the final pay. The amount of the payment or forfeiture generally relates to the period of notice. It must be in proportion to and be a genuine forecast of the probable loss. It cannot be a penalty. The other, less usual action is to apply to the Employment Relations Authority to impose a penalty on the ex-employee for breaching their employment agreement.
Note that you can only deduct wages in lieu of notice if there is a clause in the employment agreement that allows you to do so. Otherwise, you must pay employees for the days that they worked. You must also pay their holiday pay due on termination of employment, even if they did not give any notice (or less than provided for in the agreement).
Of course, there will be occasions when you don’t want an employee in your business once they have resigned.
Gardening leave
Gardening leave is a term sometimes used to describe a period in which an employee doesn’t attend work but is still employed/paid. It might be used to protect your business from a disaffected exiting employee or where they are going to be working for a competitor at the end of their notice period. But it could be to help an employee who is being made redundant have time to look for work. Garden leave can only be used if there is a provision in the employment agreement.
Please note, whilst your employee is on garden leave all the terms and conditions of their employment apply. They are still paid and entitled to their benefits such as sick leave and annual leave. You shouldn’t take back any company property such as a company vehicle, laptop or mobile phone until the end of the notice period. Employees must hold up their contractual obligations too such as maintaining fidelity and confidentiality and any lawful restrictions on working for another employer also apply. Any restraint of trade provision takes effect after the end of the garden leave period.
Payment in Lieu of Notice
Payment in lieu of notice means that termination of employment applies immediately and you pay what is owed to your employee instead of letting them work. Again, you can only use this option if there is provision in the employment agreement or your employee agrees to it. If not, they are entitled to work their notice period.
Leave during notice period
Employees quite often ask to take annual leave during the notice period. You can’t unreasonably refuse this request however a fair and reasonable reason to refuse could be that their full-time service is needed to ensure a thorough hand over. It can also depend on your leave policy; a requirement for a certain period of notice may give you the right to deny a request.
Final Pay
Employees should receive their final pay on the pay day for their final period of employment at the latest, but you can agree that final pay will be made on their last day of work. Pay must include:
- Payment for all the hours worked since the last pay until the end of employment.
- Payment for unused annual holidays, public and alternative holidays owing.
- Any additional lump sum or other payments owing which may be included in the employment agreement or negotiated as part of a leaving package.
- Any authorised deductions can be taken from the final pay.
Leaving the door open
And finally, if you’d like your employee to be staying then tell them so and leave the door open for them to return. In this recent survey by Joblist of more than 15,000 job seekers, more than a quarter of workers who quit regretted their decision. Onboarding brand new people is considerably higher than taking back previous employees.
