Employer's duties when an employee leaves

Employees have certain rights:

To notice
To a fair dismissal process
To certain payments
To have their employer complete certain forms

Final payments

When an employee's employment comes to an end, they may be entitled to certain payments.

These will consist of an employee's regular wage and various other payments owed to them and is calculated to the date on which they end their employment. These may include:

Any outstanding pay including overtime
Statutory Sick Pay, if the employee is receiving it
Statutory Maternity Pay, if the employee is entitled to it
Outstanding holiday pay, entitlement accrued but not yet taken, subject to contract
Pay in lieu of notice if you are not allowing or requiring the employee to work their notice period
Contractual redundancy pay if you have made an employee redundant

The employer will make deductions from this final payment which include:

PAYE
Income tax
National insurance contributions
Any outstanding loans, for instance a travel season ticket loan, development loan
Any holiday taken in excess of accrued entitlement.

Right to minimum pay during the notice period

An employee whose contract of employment specifies normal working hours and who works throughout those hours during the period of notice is entitled to receive normal pay for that period.

Legislation provides for a minimum hourly rate of pay during the minimum period of notice for any period during normal working hours that the employee is:

ready and willing to work, but no work is provided; or
incapable of work because of sickness or injury; or
absent from work wholly or partly because of pregnancy or childbirth or on adoption, parental or paternity leave; or
on holiday in accordance with the terms of employment.

The minimum average hourly rate of pay is produced by dividing a week’s pay by the number of normal weekly hours.

Reduction of minimum pay during the notice period

If an employee receives any of the following kinds of pay during their notice period (whether statutory or not)

sick pay
maternity pay
paternity pay
adoption pay
holiday pay

the employer can reduce the notice pay by this amount, providing it relates to the same pay period. An employee is not entitled to be paid twice for the same period.

Further information:

Business Link: holiday pay on termination of employment
HMRC employer helpline

Statutory forms

An employer is also required to complete certain forms:

P45 form

When an employee leaves employment, an employer is obliged to provide them with a P45 form. This a four-part document stating the employee's tax code, total pay and total tax paid since the beginning of the current tax year. The employee will need to present this to a future employer.

Part 1 has to be sent to the HM Revenue & Customs (HMRC) office dealt with by the employer. The other three parts are given to the employee. They should retain part 1A for their own records and give parts 2 and 3 to their new employer.

Statement of Statutory Sick Pay

Where an employee's contract of employment ends the employer must issue a SSP1(L) leavers statement, if:

The employee had a period of incapacity for work during the eight weeks (56 calendar days) ending with the date on which the contract ends
SSP was payable for at least one week
The employee requests such a statement or statements

The employer keeps one copy and must give the other copy to the employee within seven calendar days of the employee making the request or, where this is not practicable, no later than the first pay day falling within the tax month following that request.

Exit interviews

When an employee leaves the organisation it is good practice to conduct an exit interview. The information gathered may enable the organisation to improve selection criteria or employee retention.