How Much Notice Should You Receive From Your Employer?

Contractual Notice

Contained within your contract of employment should be a notice period clause. This states the amount of notice required before your employer can dismiss you or you can leave the company. In the absence of such a clause, there will be an implied term to give reasonable notice. The parties can mutually agree to shorten the required length of notice or waive their right to receive notice completely.

Any contractual notice must be equal to or greater than the statutory notice periods (see below); otherwise, it is unenforceable.

Where an employee had committed a repudiatory breach of the employment contract terms, the employer can terminate without giving notice. The most common example of this is where the employee has committed an act of gross misconduct.

Statutory Notice

In the absence of a contractual term on notice, the statutory notice provisions will apply. These state that the following periods of notice need to be given by an employer to an employee:

• At least one week’s notice if employed between one month and 2 years
• One week’s notice for each year if employed between 2 and 12 years
• 12 weeks’ notice if employed for 12 years or more

The statutory provisions will also apply where an employee’s contract of employment provides for less notice than the statutory minimum. This won’t be the case, though, when an employee’s conduct allows the employer to terminate the contract with immediate effect.

Not giving statutory notice extends the termination date, affecting the qualifying period for an unfair dismissal claim. Consequently, employees dismissed less than a week before reaching two years’ service may still be able to claim unfair dismissal.

How Much Notice Must You Give to Your Employer?

Check your contract of employment. This will usually state how much notice you must provide once you have resigned prior to your employment ending. If your contract doesn’t specify, you must give at least one week’s notice after a month of employment.

When Does Your Notice Period Start?

Notice isn’t effective until it is given and effectively communicated to an employee with either:

• (i) an ascertainable date on which the contract is due to come to an end; or
• (ii) facts from which the date can be inferred.

Case law tells us that notices sent by post are effective when they come to the employee’s attention, and the employee has read the communication containing the notice or has had a reasonable opportunity to do so.

How Should You Give Notice?

Check your contract of employment to see whether it specifically states how notice should be served and to whom. Even if your contract doesn’t say so, we would always recommend that you give notice in writing. Make sure it is clear that notice is being served, and state when your last day of employment will be. This helps to avoid any arguments later that you didn’t serve notice correctly.

What if You Don’t Get Proper Notice From Your Employer or Any Notice at All?

If your employer doesn’t provide the correct notice, as established in your employment contract, they will be in breach of contract. This could give rise to a claim for wrongful dismissal. In such circumstances, you may be entitled to make a claim for damages for the amount you would have received if notice had been given correctly. You may also be able to bring an unlawful deduction from wages claim.

If your contract of employment provides for less notice than the statutory minimum, the statutory minimum must be given. Otherwise, a breach of contract/wrongful dismissal could arise.

The only way an employer can lawfully give you no notice is if you have committed a fundamental breach of your contract of employment. This would entitle them to dismiss you summarily (e.g. with no notice). The most obvious example would be gross misconduct on your part.

However, even in such circumstances, it might be worth seeking legal advice. This is because a sector specialist can help ascertain whether your employer can, in fact, dismiss you with no notice.

What is Pay in Lieu of Notice (or “PILON”)?

PILON means ‘pay in lieu of notice’. This is where an employer elects to make a payment in lieu of the salary (and possibly benefits) you would have received if they allowed you to remain an employee and work your notice period (once it has been served by either party).

When an Employer Can Use PILON

Many employment contracts contain a clause which allows employers to elect to make a PILON payment. In doing so, they terminate an employment contract early, rather than allowing the employee to work their notice period.

Employers may do this, for example, if someone has access to confidential information and there are concerns regarding misuse. Many employees also prefer PILON payments, as they usually receive a lump sum payment, without having to work their notice.

If your contract allows your employer to make a PILON payment, check the wording carefully. Look to see whether you will receive just basic salary or salary and benefits for the notice period.  If the contract is silent on what will be paid, you can argue that you should receive salary and benefits.

PILON Without a Contractual Clause

What if your employer wants to make a PILON payment, but there’s no PILON clause in your contract of employment?

Where there’s no PILON clause in the employment contract, employers are technically in breach if they make one. The employee may therefore be entitled to claim damages for the contract breach. Said damages would cover the financial losses arising from the breach, and could include commission payments, pension contributions, and more. Additionally, you are usually released from any restrictive covenants contained in the contract. However, in this situation, an employee is under an obligation to mitigate any losses during the proper notice period.

What is Garden Leave?

Garden Leave occurs when employers want to stop employees working during their notice, but don’t want to make PILON payments.  It’s usually used for senior employees, sometimes to stop them from working for competitors straight away. Alternatively, it could keep them off the marketplace long enough for sensitive information to go out of date.

When placed on garden leave, employees are usually asked to remain at home and not complete work. That is, unless expressly instructed to, but they should still be paid as normal. Many employees are pleased to be placed on garden leave for this very reason. Despite this, they cannot get another job during garden leave, as they remain an employee of said company.

During garden leave, an employer may insist an employee uses any outstanding annual leave entitlement, not contact customers or suppliers and prohibit an employee from working elsewhere, amongst other things.

If an employee has restrictive covenants contained in their contract of employment, an employer may offset any time spent on garden leave against the length of the restrictive covenant.

What Happens if You Breach Your Garden Leave Clause?

An employee who breaches their garden leave clause could be liable for any losses an employer incurred as a result of the breach.  So, for example, if an employee misused company information whilst on garden leave and/or contacted clients and enticed them away, they could be liable for damages for the financial losses that resulted from the breach.

In addition, an employer could apply for an injunction to prevent the employee on garden leave from working for a competitor during the garden leave period.  However, it is rare for a court to grant such an injunction, and they are more likely to award damages to compensate the employer for any losses caused by the breach.

Can Notice Be Withdrawn or Varied Once it’s Been Given?

Once it has been validly given, notice cannot be withdrawn or varied, other than by mutual consent.  Where notice is given in breach of contract (e.g. short notice or no notice at all), it will not be effective to terminate the contract, unless it is accepted by the other party.

What Should You Be Paid During Your Notice Period?

If you work during your notice period, the general rule is that you should be paid exactly the same as you ordinarily are and receive the same salary and benefits (so, for example, holiday pay or sick pay).

What are You Rights to Receive Your Salary and Benefits During the Notice Period?

Some contracts of employment state that employees will not receive benefits such as commission for work done during the notice period and/or bonuses that fall due when an employee is serving notice, so always check your contract of employment to understand what should be paid during the notice period.

Will You Receive Your Bonus if You Have Given or Received Notice?

That depends.

If you are still employed on the usual bonus payment date (including on garden leave), you should still receive your bonus.

If your employment is terminating prior to the usual date that bonuses are paid because you have served notice, you might expect to receive a pro-rata payment for the period you were employed.  However, most bonus clauses will specifically state that in order to receive a bonus, an employee needs to be employed on the payment date and not have served notice at that time.

Where your employer has served notice on you and has elected to make a PILON payment and you are not going to be employed on the date bonuses are paid out, you will not be entitled to receive your bonus unless your contact specifically states that a pro-rata bonus will be paid when you leave part way through the bonus year, although such a provision is rare.

Where there is no PILON clause, an employer making a payment in lieu of notice is in breach of contract, and you could attempt to seek damages arising out of that breach, which would include payment of the bonus.

Can You Leave Without Giving Full Notice or Any Notice at All?

If your employer has breached a fundamental term of your contract of employment, you could be entitled to resign from your employment immediately without the need to serve your notice period.

If there is no fundamental breach on the part of your employer, failure on your part to provide your employer with the notice they are entitled to receive under your contract of employment could mean that you are in breach of contract and your employer could be entitled to claim damages in respect of that breach (unless of course, they agree to you not providing the correct notice and are happy for you to leave your employment early).  So, for example, if a chef gave no notice to their employer and they then had to hire a replacement chef to cover the notice period, and the cost of the replacement chef was higher than the original employee’s salary, the employer could claim damages for the increased costs.  However, an employer cannot force an employee to work their notice period if they don’t want to.

Senior employees should consider the risk of an injunction to stop them working for a competitor during the period they should have been serving notice, however this is rare as the employer would have to show a ‘legitimate business interest’ that can only be protected by stopping the employee working for the competitor.

What About Holiday and Notice Periods?

Holidays still accrue during the notice period, and your employer should allow you to use your holiday during the notice period (unless there is a contractual term banning this or they have a good business reason to refuse the request) or make a payment in lieu of any accrued, but untaken holidays on the termination of your employment.

Can Your Employer Force You to Take Outstanding Holiday During Any Notice Period?

Some contracts specifically state that employees need to use all of their holiday prior to their employment terminating, so you could find that your employer insists that you take all of your holiday during the notice period.

In addition, provided an employer gives you adequate notice (at least double the number of days leave which you wish to take), an employer can specify that an employee uses their holiday during the notice period.

What About Share Options, Restricted Share Units, and Deferred Compensation?

Whether or not share options, restricted share units, and deferred compensation are payable when an employee is serving notice very much depends on the rules of the particular scheme in place governing the payment, which may or may not be contained in an employee’s contract of employment.

Share options that have already been exercised cannot usually be taken away from an employee, and if they have not been exercised, an employee can try to negotiate, realising the value of the share options.

Restricted Stock Units that are due to vest or be fully distributed after employment has ended often have to be forfeited, but always check the scheme rules. Where an employer has terminated the employment contract in breach (e.g. by making a PILON payment when there is no provision for one in the contract), an employee may be able to make a claim for them.

It is also important to check what the position is with regard to any deferred compensation, such as bonuses. The bonus scheme rules might state that an employee serving notice will forfeit the right to receive their bonus. If an employer elects to make a PILON payment, the PILON clause needs to be checked to see whether the bonus will be paid, as well as the salary that would have accrued during the notice period. Where there is no PILON clause, the PILON payment would amount to a breach of contract and in these circumstances, the employee can try to claim damages for any bonus they would have received during the notice period.