In recent times, UK workers have moved away from the ‘one job for life’ attitude, with research by AAT suggesting that the average Brit will work in 6 different companies before retirement.
If you’re an employer, you will inevitably have to deal with an employee leaving your company at some point; be it due to relocation, dismissal, redundancy, retirement, moving to another company or any other reason.
In order to make the departure as easy as possible for both yourself and the employee, we’ve compiled a checklist for what to do when an employee leaves your company, including both payroll obligations to ensure compliance and practical tips to ensure the departure doesn’t impact your business or the employee in a negative way.
Payroll and Accounting Obligations
- Organising Their Final Pay – Once the terms of the employee’s departure have been agreed, you will need to calculate their final pay. This should take into account the date of the month which the employee is leaving, any remaining holiday pay, salary, bonuses or redundancy pay. If an employee refuses to work their notice period, you will not need to pay them for this time. However, should you choose to place an employee on gardening leave, you will need to pay them for their notice period.
- Notifying HMRC – When an employee leaves your business, you will need to send their final pay details and leaver details to HMRC; this should be done when you send the next Full Payment Submission (FPS).
- Issuing a P45 – Once HMRC has been notified, you can produce a P45 to be given to the employee. As an employer, you are obliged to do this when an employee stops working for you. If your payroll software doesn’t automatically produce them, you can download a blank P45 form from GOV.UK. You are not required to issue an employee with a P60 if they leave during the tax year as all the necessary information is within the P45.
If you use an accountant to manage your payroll, you should ensure that they are notified of the employees intended leaving date in order to fulfil the above obligations on your behalf.
Practical Checklist when an employee is leaving the business
- Get Written Confirmation – When an employee expresses their desire to leave the company, ensure you get written confirmation of their resignation and then confirm with them in writing their leaving date to prevent any confusion or disputes down the line.
- Refer to Their Contract – If there are any certain terms of employment such as how long their notice period is, return of company equipment or repayment of tuition fees, these will be detailed in the contract signed by the employee at the start of their employment. All of these terms should be confirmed in writing when accepting their resignation.
- Arrange Handovers – To ensure the service you provide isn’t disrupted, you should implement proper handover periods with the employee leaving and the employee(s) that will be responsible for their workload following departure. If they have a client facing role it is good practice to ensure clear communication of the changes to the impacted clients rather than them finding out by default that their contact has left the business.
- Conduct an Exit Interview – In some circumstances (such as if an employee leaves unexpectedly), an exit interview can be beneficial in producing some insight as to why they are leaving and may improve future employee retention rates. Take a look at 7 must ask exit interview questions for examples of the questions you may ask.
- Revoke Access – If your employee had access to company software or technology, you should ensure that their access is removed, this is particularly important for client protection if the employee is moving to a competitor – in these circumstances, you may choose to place an employee on ‘gardening leave’.
Most importantly, leave things on a high note! Thank the employee for their service and wish them the best in their future ventures – you never know when your paths may cross again. Note that the above primarily relates to an employee resigning, processes may be different and, in some cases, will require HR input such as redundancy, retirement and dismissal.
Am I Obligated to Give a Reference?
No, you are not legally obliged to give a reference to an ex-employee unless there is a written agreement to do so or if you work in a regulated industry. If you do give a reference, you must ensure it is accurate and fair. An ex-employee can challenge your reference if they think it is unfair.
Contrary to popular belief, a reference doesn’t have to be a long document about employee performance, it can be as basic as a job title, salary and when the worker was employed, serving as confirmation for the potential new employer.
How Can I Reduce Employee Turnover?
Pay, issues with management, feeling undervalued, lack of opportunity and dissatisfaction with working hours are among the top reasons employees leave.
Whilst there is no way you can hold onto all your employees; you may find making some simple changes in your business reduces staff turnover:
- Choose the right person for the job, ensure your advertising for job roles is clear and carry out adequate interviews and a trial period before offering someone the position.
- Offer modern benefits such as remote working, flexible working, company cars, discounts on various services such as gym memberships etc.
- Have processes in place to aid staff development and career progression.
- Offer performance-based bonuses and ‘share the wealth’ when the company performs well.
- Ensure that employees are paid the correct amount at the correct time each payroll period.
- Recognise and reward hard work.
Payroll Specialists Bristol
If you’re currently saying goodbye to members of staff or hiring new ones and are struggling with your payroll obligations, we can help.
We have years of experience working with businesses of all structures across a wide range of industries to help simplify their payroll requirements. For more information about outsourcing your accounting and payroll, call one of our team today on 0117 3790810.
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This post was written by Steph Roffey