Notice periods are one of the most commonly misunderstood areas of employment law. Whether an employee resigns or you need to end someone's employment, understanding the rules around notice is essential. Getting it wrong can result in a wrongful dismissal claim, financial penalties, or an employee walking away without serving their notice when you need them most.
This guide covers the statutory minimums, how contractual notice works, and the practical options available to both employers and employees during the notice period.
What is a notice period?
A notice period is the minimum amount of time that must pass between one party giving notice to end the employment and the employment actually ending. It applies to both resignation and dismissal. The only exception is summary dismissal for gross misconduct, where you can end the employment immediately without notice.
Notice can be given by either side. When an employee resigns, they give you notice. When you dismiss an employee, you give them notice. The length of notice required depends on the statutory minimum, the terms of the employment contract, or both.
Statutory minimum notice from the employer
The Employment Rights Act 1996 sets out the minimum notice an employer must give to an employee based on their length of continuous service:
- Less than 1 month's service: No statutory notice required.
- 1 month to 2 years: 1 week.
- 2 to 12 years: 1 week for each complete year of service. For example, an employee with 5 years of service is entitled to 5 weeks' notice.
- 12 years or more: 12 weeks. This is the statutory maximum, regardless of how long the employee has been with you.
These are the absolute minimums. You cannot contract out of them. Even if the employment contract specifies a shorter notice period, the statutory minimum overrides it.
Statutory minimum notice from the employee
The statutory minimum notice an employee must give is much simpler: 1 week after they have completed 1 month of continuous service. Unlike employer notice, this does not increase with length of service. An employee with 20 years of service is only required by statute to give 1 week's notice.
In practice, of course, most contracts specify a longer period.
Contractual notice periods
The employment contract can specify a longer notice period than the statutory minimum, and this is very common. Typical contractual notice periods are:
- 1 month: The most common for standard roles. This gives both sides a reasonable amount of time for handover and recruitment.
- 3 months: Common for management and senior roles where the impact of someone leaving is greater and finding a replacement takes longer.
- 6 months: Typically reserved for directors, key executives, and specialist roles where continuity is critical.
If the contract is silent on notice, the statutory minimum applies. If the contract specifies a period shorter than the statutory minimum, the statutory minimum overrides it. In other words, the employee always gets whichever is longer.
Notice during a probationary period
Many contracts specify a shorter notice period during the probationary period, commonly 1 week from either side, reverting to the full contractual notice period once probation is passed. This gives both parties more flexibility during the early stages of the employment relationship.
However, the probationary notice period can never be shorter than the statutory minimum. In practice, since the statutory minimum for employees with less than 2 years' service is 1 week, a 1-week probationary notice period aligns with the statutory floor.
Payment in lieu of notice (PILON)
Sometimes it is in everyone's interests for the employment to end immediately rather than having the employee work through their notice period. Payment in lieu of notice, commonly referred to as PILON, is where the employer pays the employee their wages for the notice period and ends employment straight away.
There are important rules around PILON:
It must be in the contract or agreed by both parties. If your employment contract includes a PILON clause, you can choose to make a payment in lieu of notice at any time. Without a PILON clause, paying the employee off without their agreement is technically a breach of contract, even if you are giving them money.
PILON is taxable as earnings. Since April 2018, all payments in lieu of notice are subject to income tax and National Insurance, whether or not there is a contractual right to PILON. This is calculated on the employee's basic pay for the notice period they would have worked.
It ends the employment immediately. Once PILON is made, the employee is no longer employed. Their restrictive covenants start running from the termination date, not from the end of the notice period they would have worked.
We always recommend including a PILON clause in your employment contracts. Without one, your options are more limited if you need to end employment quickly. PILON clauses are also an important consideration when negotiating settlement agreements, as they affect how the financial package is structured.
Garden leave
Garden leave is a different approach. The employee remains employed during their notice period and continues to receive their full pay and benefits, but they are not required to attend work or carry out their duties.
It must be in the contract. Without a garden leave clause, you generally cannot prevent an employee from working during their notice period. They could argue they have a right to work and to maintain their professional skills.
The employee remains bound by all contractual obligations. During garden leave, the employee is still employed. That means their duty of fidelity, confidentiality obligations, and restrictive covenants all continue to apply. They cannot start working for a competitor or approach your clients.
It is useful for protecting the business. Garden leave is most commonly used when a senior employee is leaving to join a competitor. By keeping them on the payroll but out of the business, you prevent them from accessing clients, taking confidential information, or influencing colleagues, while their knowledge of your business becomes increasingly out of date.
It runs concurrently with restrictive covenants. Courts may reduce the duration of post-employment restrictive covenants by the length of any garden leave served, on the basis that the employee has already been restricted during that time.
When an employee refuses to work their notice
If an employee resigns and then refuses to come into work during their notice period, you have limited options. You cannot physically force someone to work. However, you can:
- Withhold pay for days not worked. If the employee does not turn up, you are not obliged to pay them for time they did not work.
- Remind them of their contractual obligations. A letter confirming their notice period and obligations, including any restrictive covenants, can sometimes bring people back.
- Pursue a breach of contract claim. In theory, you can claim damages if the employee's failure to work their notice causes you a quantifiable financial loss. In practice, this is rarely pursued for standard roles, but it may be worthwhile for senior positions where the impact is significant.
The best protection is a well-drafted contract with clear notice provisions and garden leave clauses.
Wrongful dismissal
Wrongful dismissal occurs when an employer terminates employment without giving the correct contractual or statutory notice, and without a valid reason to dismiss summarily (such as gross misconduct) or a PILON clause.
It is important to distinguish wrongful dismissal from unfair dismissal. Wrongful dismissal is a breach of contract claim. The employee's remedy is their notice pay, the amount they would have been paid had they worked their notice period. Unfair dismissal is a statutory claim about whether the reason for dismissal and the process followed were fair.
You can have a fair dismissal that is also wrongful (for example, dismissing for genuine redundancy but failing to give the correct notice). You can also have a wrongful dismissal that is not unfair (for example, dismissing without notice during the first two years of employment when the employee has no unfair dismissal rights, but breaching a contractual notice period).
Notice during redundancy
Statutory and contractual notice periods apply to redundancy dismissals in exactly the same way as any other dismissal. There is no reduced notice for redundancy.
Additionally, employees with two or more years of continuous service who are being made redundant are entitled to reasonable time off during their notice period to look for new work or arrange training. This time off is paid at the standard rate, though the statutory entitlement is capped at 40% of a week's pay.
Redundancy pay is calculated separately from notice pay. An employee is entitled to both their redundancy payment and their notice pay, and these should not be set off against each other unless the contract specifically provides for this.
For guidance on managing redundancy procedures, including notice requirements, visit our redundancy support page.
Practical tips for employers
Always check the contract first. Before giving or accepting notice, confirm what the contract says. Do not assume the statutory minimum applies if the contract specifies a longer period.
Put PILON and garden leave clauses in every contract. These give you flexibility to manage departures in the way that best protects your business. Without them, your options are limited.
Confirm notice in writing. Whether you are giving notice or receiving it, confirm the arrangements in writing: the notice period, the last day of employment, any garden leave or PILON arrangements, and what is expected during the notice period.
Plan the handover. Notice periods exist for a reason. Use the time to ensure a proper handover of responsibilities, client relationships, passwords, and ongoing projects.
If you need to review your employment contracts or want advice on managing a departure, our contracts of employment service can help ensure your terms are watertight. For advice on dismissals and the associated notice requirements, see our dismissals support page.
Book a free consultation to discuss your situation.
