FAQs: Termination payments for employees dismissed due to ill health
23 October 2013 [checked in July 2019 – it still reflects the law at that date]
We sometimes receive queries about what should be paid to an employee who is dismissed due to long-term ill-health. We answer these questions below and give some guidance on a slightly strange provision around the payment of notice in such circumstances:
If an employee is dismissed because he or she can no longer do their job because of long-term ill health, what payments are they entitled to?
The employee will be entitled to be paid in respect of holiday which has accrued but not been taken. Please see our previous articles on this subject.
Will the employee be entitled to notice to terminate their employment?
The employee will be entitled to notice in accordance with their contract, or to statutory minimum notice if that is greater. The statutory minimum notice required from an employer is 1 week for each year of service, up to a maximum of 12 weeks. So, for example, if a contract of employment says that someone is entitled to 4 weeks’ notice, but they have been employed by the employer for 6 years, they will be entitled to 6 weeks’ notice.
Is the employee entitled to be paid for this if their entitlement to contractual or statutory sick pay has been used up?
In short, it depends. Logic suggests that if the employee has used up their entitlement to sick pay, then they should not be paid for the period of notice – after all, if the employer did not dismiss and simply left them as an employee, then they would not get paid. However, the law is not that logical or simple! Under the legislation, an employee in this situation is entitled to be paid for notice of dismissal given by their employer if their notice period is the statutory minimum, or up to 6 days more than the statutory minimum. However, if their notice period is 1 week or more longer than the statutory minimum, they are not entitled to be paid during their notice period.
Here are some examples help to illustrate the workings of this strange statutory provision:
- An employee has a contract of employment which provides for 1 month’s notice. The employee is dismissed after 30 months due to ill health and his entitlement to all sick pay has been used up. He is therefore entitled to statutory minimum notice of 2 weeks (2 full years’ service). His contractual notice at 1 month is more than 1 week longer than this, so the employee is not entitled to be paid.
- The same employee has 4 years’ service when he is dismissed. His statutory notice is now 4 weeks, so he is entitled to be paid as his contractual notice of 1 month is less than 1 week more than his statutory notice.
- An employee with 20 years’ service has a contract of employment which provides for 3 months’ notice. He is dismissed for ill health and his entitlement to all sick pay has been used up. His statutory notice is 12 weeks (the maximum), so his contractual notice at 3 months is 1 week more than this. He is therefore not entitled to be paid.
- The same employee has a contract which provides for 1 month’s notice, or one week for each year of service up to a maximum of 12 weeks, whichever is the greater. His notice entitlement is therefore 12 weeks which is the same as his statutory notice. He is therefore entitled to be paid.
It is worth noting that the position may be different if the employer makes a payment in lieu of notice, so if you are considering doing that then it is best to take advice (we can help!).
Why is the legislation drafted like this?
No idea! The rules have been like this for many years, and we have never understood the logic behind them and have never read anything which shines any light on the thought process (if there was one!) which went into the drafting.
Whether you are an employer or an employee, if you need advice on this or any other aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).