Bonus schemes are a common practice in the UK. These bonuses can be either guaranteed within the Employment contract, discretionary or a mixture of the both. Ultimately this means that you can be considered for a bonus, however the employer has the final approval on any discretionary bonus pay outs.

In the UK employees are entitled to a period of notice to bring the contract to an end unless they have committed an act of gross misconduct. If the employee has not committed an act of gross misconduct the contract will continue until it is brought to an end in accordance with its terms. Normally either by giving the required notice or making a payment in lieu of notice if this is provided for in the contract.

For employees without unfair dismissal rights (with less than two years’ service) employers can dismiss without a fair reason so long as they do not dismiss on the basis of a discriminatory or automatically unfair reason and they comply with the terms of the contract of employment. It is automatically unfair to dismiss an employee for a wide variety of reasons. This includes dismissing an employee because they have taken advantage of statutory rights to maternity, paternity or parental leave or exercised their right to join or participate in trade union activity these are a few examples but there are numerous other reasons.

Once an employee has two years’ service, they will have right against unfair dismissal and the employer may only dismiss for one of five prescribed legitimate and fair reasons. A fair procedure must also be followed, to avoid unfair dismissal.

Legitimate (fair) reasons to dismiss an employee:

• misconduct
• capability or qualifications
• redundancy
• application of a statutory restriction (for example the employee no longer has a right to work in the UK)
• for “some other substantial reason” (“SOSR”)

SOSR is often, for example, because an employee has refused to agree to a variation in terms and conditions of employment. The courts in the UK apply a narrow interpretation as to whether an employer’s reason constitutes “SOSR”.

The UK statutory minimum notice period for employees is as follows:

• Employed for less than one month – no entitlement to statutory notice period.
• Employed for one month to two years – minimum one week’s notice.
• Employed for two to twelve years – minimum two weeks notice, plus an extra week for each additional year of continuous employment, up to a maximum of twelve weeks.

In the UK, there is no legal right to receive severance pay, but many employers will offer it as part of their redundancy packages.

Severance or redundancy package’s for your employees would usually include a lump sum payment based on length of service and salary. It is also common for employees to be paid a sum in lieu of notice, usually equal to the value of pay over the notice period.

Restrictive covenants and non-compete clauses (sometimes known as post-termination restrictions) are clauses within a contract of employment or a Settlement Agreement which prevent a leaving employee from taking clients or key employees from their former employer, or working for a competitor. These are generally enforced once the employment relationship has ended.

Types of Restrictive Covenants:

• Non-compete: This restricts an employee’s ability to work for certain competitors or carry on a competing business for a certain period of time after termination.
• Non-solicitation of customers: This prohibits an employee from soliciting certain clients or customers of their former employer for a certain period of time after termination.
• Non-solicitation of employees: This prohibits an employee from soliciting certain employees of their former employer for a certain period of time after termination.
• Non-dealing: This prohibits an employee from doing business with certain clients or customers of their former employer for a certain period of time after termination.

Restrictive covenants are not automatically valid and enforceable simply because they have been incorporated into a contract of employment. In fact, there is a presumption that restrictive covenants are automatically void for being in restraint of trade and contrary to public policy, unless the employer can show both of the following, the employer has a legitimate proprietary interest that is appropriate to protect with the restrictive covenant. Or, the protection sought is no more than reasonable having regard to the interests of the parties and the public interest.

Fixed-term workers may be contracted to work for a fixed period of time only, or to perform a particular project with the contract terminating at the end of this period, or on the completion of the project. Examples are those who are employed specifically to cover for maternity or paternity leave; employees hired to cover unusual peaks in demand as in the tourist industry; and employees whose contracts will end on the completion of a specific project. There is no requirement for fixed-term contracts to specify the reason why it has been concluded for a fixed-term, although a job title should be included in the contract. This is done to comply with the employer’s statutory requirements on the written statement of particular conditions of employment.

The regulations say that where an employee has been continuously employed on successive fixed-term contracts for four years or more (from July 10, 2002), the employee will automatically receive permanent status.