How to exit an employee while avoiding a constructive dismissal claim

Business owners often contact us to help them with a difficult employee that needs to go.

And, if this is right for the business, there are ways to ‘manage’ an employee out of the business. (Even though this term is widely discouraged these days.)

But here’s the risk – you could face a constructive dismissal claim if you mishandle it. That means the employee could take you to a tribunal, claiming they were forced to resign due to unfair treatment, which could cost you thousands of £££.

So, how do you exit an employee while avoiding a constructive dismissal claim?

1. Understand what constructive dismissal looks like

Constructive dismissal occurs when an employee resigns because their employer has made fundamental changes to their working conditions or created a hostile work environment, effectively forcing them to leave.

Under UK law, constructive dismissal is covered by the Employment Rights Act 1996 and is treated as a form of unfair dismissal.

Constructive dismissal looks like…

• Unlawful changes to pay or benefits
• Significant changes to job role or duties
• Unreasonable changes to working hours or location
• Discriminatory behaviour
• Toxic or hostile work environment
• Failure to address grievances
• Forcing resignation

2. Create fair dismissal grounds based on performance or capability

You can’t just push an employee out. There needs to be fair grounds for their dismissal. To create this, you should…

Set clear expectations – Ensure that the employee understands what is required of them. If performance is the issue, provide measurable targets.

Provide support and opportunities to improve – This could include additional training, mentoring or reasonable adjustments.

Use formal performance management procedures – If they are not meeting expectations, follow your company’s disciplinary or capability process.

Document everything – Keep records of conversations, warnings and any support offered. A solid paper trail can protect you if a claim is made.

If the employee fails to improve despite support, you may have grounds for a fair dismissal based on performance or capability.

3. Consider alternative exit strategies

If it’s clear that the employment relationship is no longer working, but you want to avoid a drawn-out dismissal process, consider:

Mutual agreement – Sometimes, an honest conversation leads to a mutual decision that the employee should move on.

Settlement agreement – Offering a financial package in exchange for a resignation and a legally binding contract can be a clean exit.

Redeployment – If they struggle in one role, could they be better suited elsewhere?

Always get expert HR advice.

Before you do anything, please seek expert HR and legal advice.

You can exit employees fairly, legally and without recourse with the right support. But rush the process, and you could face a hefty fine at an employment tribunal, which would annoy you even more.

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