AN employee who is to be dismissed for long-term capability issues is entitled, like any other employee, to a period of notice.

All employees are entitled to the statutory period of notice set out in the Employment Rights Act 1996 - that is one week's notice for each completed year of employment up to a maximum of 12 weeks.

Employers should note that, even where the employee is receiving only statutory sick pay or is receiving no pay at all, they are nevertheless entitled to be paid their notice calculated at the normal rate of pay when dismissed on health grounds.

This can be a valuable benefit to an outgoing employee, particularly one with lengthy service but who has exhausted their contractual sick pay entitlement. Many employers are simply unaware of their obligation to make up notice pay in this way.

Even those who are aware of the rule are not likely to be aware of the bizarre exception which applies where the contractual notice to which the employee is entitled is at least a week longer than the Employment Rights Act says, the entire notice period is paid at the rate of Statutory Sick Pay and does not need to be made up to full salary.

For example, an employee with only four years' service would, under statute, be entitled to four weeks' notice pay, whereas under a contract of employment, they may be entitled to three months' notice. If the employee was receiving statutory sick pay, or indeed no pay at all at the time of the dismissal, they would not be entitled to have the pay made up to full salary.

This little-known twist in the law often comes as a surprise to employers and employees. Despite making no particular sense, it remains good law. Employers are now realising that, by clever drafting of the sick pay provisions and the notice provisions in contracts of employment, they are able to save considerable sums of money by ensuring that employees leaving on health grounds receive no notice pay, or at best, notice pay calculated at a much lower rate than normal.

- Stephen Elliott is a solicitor in the employment team of North-East law firm Ward Hadaway. He can be contacted on 0191-204 4000 or by email at stephen.elliott@wardhadaway.com

Published: 27/04/2004