How do you terminate a UK employee in 2026?
Statutory notice scales with tenure. Redundancy pay caps at £751/week. The protective award for collective redundancies doubled to 180 days’ pay in April 2026.
· United Kingdom guide
UK termination is procedure-driven. Statutory minimum notice scales with tenure: none under 1 month, 1 week between 1 month and 2 years, 1 week per year after that, capped at 12 weeks at 12+ years of service. Redundancy pay applies after 2 years’ continuous service with a weekly pay cap of £751 from 6 April 2026. From January 2027, the unfair-dismissal qualifying period drops from 2 years to 6 months, a meaningful change to UK risk posture.
How much notice must you give a UK employee?
Statutory minimum notice is set by the Employment Rights Act 1996. None under 1 month of service, 1 week between 1 month and 2 years, then 1 week per year of service, capped at 12 weeks at 12+ years. Contractual notice can be longer; never shorter.
| Length of continuous service | Statutory minimum notice |
|---|---|
| Less than 1 month | None |
| 1 month to less than 2 years | 1 week |
| 2 years | 2 weeks |
| 3 years | 3 weeks |
| 5 years | 5 weeks |
| 10 years | 10 weeks |
| 12+ years | 12 weeks (statutory cap) |
These are statutory minimums. Senior roles routinely carry 3–6 months contractual notice; C-suite contracts often go to 12 months with garden leave clauses. The contract sets the floor for the employer; statutory rules set the floor for the employee.
Pay in Lieu of Notice (PILON)
Employers can pay the notice period rather than work it, if the contract has a PILON clause. PILON payments are fully taxable as earnings under the Income Tax (Earnings and Pensions) Act 2003, the historical tax-free treatment was abolished in 2018. The first £30,000 of an ex gratia termination payment (separate from PILON, contractual bonuses, and accrued holiday) remains tax-free.
What is “fair procedure” and when does it apply?
UK dismissals must follow fair procedure from day one of employment, even though the formal protection against unfair dismissal currently kicks in after 2 years (dropping to 6 months in January 2027). Procedure means: written warning, opportunity to improve, documented review meeting, right of appeal.
The Acas Code of Practice on Disciplinary and Grievance Procedures is the operational guide. Failure to follow it doesn’t automatically make a dismissal unfair, but it can increase compensation by up to 25% at tribunal and almost guarantees an unfair-dismissal finding when the qualifying period is met.
The five fair reasons for dismissal
- Conduct, gross misconduct or sustained misconduct after warning
- Capability, performance below required standard, with reasonable support to improve
- Redundancy, genuine role redundancy with fair selection
- Statutory bar, e.g. loss of right to work, lost driving licence for a driver role
- Some other substantial reason (SOSR), a catch-all that’s tightly construed
Any dismissal outside these five reasons is presumed unfair if the employee has qualifying service.
The unfair-dismissal qualifying period, January 2027 change
From January 2027, the unfair-dismissal qualifying period drops from 2 years to 6 months under the Employment Rights Act 2025. Note: this is not the “day-one rights” widely reported in the press. The Act introduced day-one rights for paternity leave, parental leave, and SSP from 6 April 2026, but unfair dismissal stays at a qualifying period, just a shorter one.
Practical implication: from January 2027 you have meaningful unfair-dismissal risk on any employee past 6 months of service. The window for “easy” dismissal compresses from 24 months down to 6.
How is UK redundancy pay calculated?
Redundancy pay applies after 2 years’ continuous service. Calculation: 0.5 week’s pay per year under age 22, 1 week per year aged 22–40, 1.5 weeks per year aged 41+. Capped at 20 years’ service with a £751/week pay cap from 6 April 2026. Lifetime cap: £22,530.
| Age band | Statutory redundancy pay per year of service |
|---|---|
| Under age 22 | 0.5 week’s pay |
| Age 22 to 40 | 1 week’s pay |
| Age 41 and above | 1.5 weeks’ pay |
The weekly pay cap rose to £751 from 6 April 2026 (from £700 the previous year). The cap matters: a £60,000 salaried employee earns ~£1,150/week, but redundancy calculations use the capped £751. Lifetime maximum statutory redundancy: £22,530.
Worked example
A 35-year-old employee with 6 years’ continuous service on £60,000 salary:
- Age band: 22–40 → 1 week per year of service
- Years of service: 6 → 6 weeks’ pay
- Weekly pay: £1,154 but capped at £751
- Statutory redundancy pay: 6 × £751 = £4,506
- Tax: redundancy pay tax-free up to £30,000 ceiling under ITEPA 2003 s.401
Enhanced redundancy schemes
Many UK employers operate enhanced redundancy schemes that pay more than statutory minimum, typically uncapped weekly pay or higher multipliers. Enhanced terms can be contractual (binding) or discretionary (not binding but creating custom-and-practice over time). Worth being explicit about which it is in offer letters.
Collective redundancy: the doubled penalty from April 2026
Collective redundancy rules apply when 20+ redundancies are proposed at one establishment within a 90-day period. Consultation periods: 30 days for 20–99 redundancies, 45 days for 100+. The protective award for failure to consult doubled to 180 days’ full pay per affected employee from April 2026.
This is the single biggest change in UK termination risk in 2026. Pre-April 2026, the protective award for failure to follow collective consultation rules was 90 days’ pay per affected employee. From April 2026 it’s 180 days. The Employment Rights Act 2025 doubled the penalty.
A botched collective redundancy of 30 employees now risks 180 × 30 = 5,400 days of full pay in protective awards, roughly £4–6 million in liability before any individual unfair-dismissal claims. The change isn’t marginal.
Consultation requirements
- Form HR1 filed with the Insolvency Service before redundancies announced
- Election of employee representatives if no recognised trade union
- Information and consultation “in good time”, 30 or 45 days before first dismissal
- Genuine consideration of alternatives (redeployment, voluntary redundancy, reduced hours)
- Fair selection criteria applied objectively
Settlement agreements: the clean exit
Settlement agreements (formerly “compromise agreements”) are the standard way to end a UK employment relationship with finality. The employee gets compensation and signs away the right to pursue claims; the employer gets certainty. Requires independent legal advice for the employee, usually paid for by the employer (£500–£1,500).
Settlement agreements are governed by section 203 of the Employment Rights Act 1996. They must be in writing, identify the specific claims being waived, and confirm the employee received independent legal advice from a qualified adviser whose details appear in the agreement.
Typical structure:
- Ex gratia payment (the “termination payment”), tax-free up to £30,000 under ITEPA 2003 s.401
- Notice pay, fully taxable as earnings (PILON)
- Accrued holiday pay, fully taxable
- Pension contributions for an additional period (sometimes)
- Reference clause, agreed wording for future reference requests
- Restrictive covenants, non-compete, non-solicit, confidentiality
- Mutual non-disparagement
- Legal fees contribution, usually £500–£1,500 paid directly to the employee’s solicitor
When to use a settlement agreement: contested performance, redundancy with mutually-agreed enhanced terms, senior exits, any termination where the employer wants finality rather than a process.
How Teamed runs UK terminations
Teamed Ltd is the legal employer, so the termination procedure runs through Teamed’s UK ops. We handle the fair-procedure documentation, notice calculation, redundancy maths, and final-pay reconciliation. Decisions on which staff to dismiss, why, and on what terms remain the client’s.
The split of responsibilities under EOR for UK terminations:
| What Teamed handles | What the client decides |
|---|---|
| Notice period calculation against statutory minimums | Whether to dismiss, why, and on what timeline |
| Fair-procedure documentation (warnings, meetings, appeals) | Performance standards and what counts as breach |
| Redundancy pay calculation and tax handling | Whether to enhance redundancy terms above statutory |
| Settlement agreement drafting with our employment-law counsel | The commercial terms (ex gratia amount, reference wording) |
| Final payroll: notice, holiday accrual, redundancy, tax codes | Whether to contribute to legal fees beyond standard |
| P45 issuance, RTI submissions, HMRC notifications | Communication with the wider team |
| Tribunal defence preparation if a claim is raised | Settlement vs defence strategy |
The economics work because Teamed carries the procedural risk at scale across many UK employers, not just yours. Tribunal defence for an individual employer is expensive; built into platform overhead, it’s minor.
The January 2027 change to the unfair-dismissal qualifying period, 6 months instead of 2 years, is the change UK employers haven’t fully priced in. Your six-month review meeting needs to start carrying the same weight as a year-one review does today.The Teamed Pod, 28 April 2026
Fair procedure isn’t a UK thing, it’s a human thing. People deserve to know what’s expected and to have a real chance to meet it.
The procedure is what protects everyone in the room, including the manager doing the dismissing.
Get the procedure right and the outcome takes care of itself.
