Dismissing an employee is one of the most sensitive and legally risky actions an employer can take. If handled incorrectly, dismissal can lead to claims for unfair dismissal, wrongful dismissal, discrimination, and significant financial compensation. In England and Wales, employers must follow strict legal rules and fair procedures to ensure that any dismissal is lawful.
Many disputes arise not because dismissal itself was unreasonable, but because the process was flawed. Understanding the legal framework and following the correct steps is essential for protecting your business and avoiding costly tribunal claims.
This article explains when an employee can be dismissed, what procedures must be followed, and how to reduce legal risk.
When dismissal is lawful
Under English law, an employee with two years or more continuous service has the right not to be unfairly dismissed. This means the employer must have a fair reason for dismissal and must act reasonably in all the circumstances.
The law recognises five potentially fair reasons for dismissal.
• Conduct
• Capability or performance
• Redundancy
• Statutory restriction
• Some other substantial reason
Conduct covers issues such as misconduct, dishonesty, or breach of company rules. Capability relates to performance, skills, or long term sickness. Redundancy applies where a role is no longer required. Statutory restriction applies where continued employment would break the law, such as loss of a required licence. Some other substantial reason is a broad category covering situations like business restructuring or breakdown of trust.
Even where there is a fair reason, dismissal will still be unfair if the employer does not follow a fair process.
Employees with less than two years service usually cannot claim unfair dismissal, but they are still protected from automatically unfair dismissal, such as dismissal related to pregnancy, whistleblowing, health and safety, or discrimination.
The importance of fair procedure
Following a fair procedure is just as important as having a valid reason. The ACAS Code of Practice sets out the standard employers are expected to follow. Employment tribunals take this code into account when deciding cases and may increase compensation if it is ignored.
A fair dismissal process generally involves investigation, written notification of concerns, a formal meeting, the right to be accompanied, and a right of appeal.
The employee must be given a clear explanation of the allegations or issues and a genuine opportunity to respond. Decisions must be based on evidence, not assumptions.
For misconduct cases, employers should carry out a reasonable investigation before taking action. For performance issues, employees should be given support, training, and reasonable time to improve.
In redundancy situations, employers must consult properly and use fair selection criteria. Failing to consult can result in unfair dismissal claims and additional penalties.
Even in cases of gross misconduct, where summary dismissal may be justified, a fair investigation and disciplinary hearing is still required.
Common mistakes employers make
Many employers lose tribunal claims because of procedural errors rather than the underlying reason for dismissal.
Typical mistakes include:
• Failing to investigate properly
• Not following internal disciplinary procedures
• Predetermining the outcome
• Not allowing the employee to respond
• Ignoring the right of appeal
Another common mistake is confusing wrongful dismissal with unfair dismissal. Wrongful dismissal relates to breach of contract, usually where notice has not been given. Even if a dismissal is fair, failing to give contractual notice may still result in liability.
Employers also frequently overlook discrimination risks. Dismissal decisions linked to protected characteristics such as age, disability, race, religion, gender, pregnancy, or sexual orientation can lead to serious claims with uncapped compensation.
Poor documentation is another major risk. Without written records of meetings, warnings, investigations, and decisions, employers struggle to defend claims.
How to reduce legal risk
The best way to protect your business is to adopt consistent, legally compliant processes and seek professional advice when issues arise.
Employers should ensure they have clear employment contracts, up to date policies, and properly trained managers. Dismissal decisions should never be rushed or driven by frustration.
Taking early legal advice allows employers to assess risks, choose the correct approach, and avoid procedural errors that can undermine their position.
At Penerely, we support employers through all aspects of employment law, including disciplinary procedures, redundancy processes, and dismissal decisions. We help businesses act lawfully, fairly, and confidently.
If you are considering dismissing an employee or facing a workplace dispute, contact Penerely today to ensure you follow the correct legal process and protect your business from unnecessary risk.
