How to Sack an Employee: The Complete Guide for UK Small Business Owners

You can legally sack an employee in the UK. The process is not complicated. But if you get it wrong the average tribunal award is £14,000 and from January 2027 that figure is uncapped. This guide tells you exactly what to do, in order, so you do not become a statistic.

The short answer first

To lawfully dismiss an employee you need two things: a fair reason and a fair process. Having the right reason but handling it badly is enough to lose at tribunal. This guide covers both.

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What counts as a fair reason to dismiss someone

UK employment law defines five fair reasons for dismissal under the Employment Rights Act 1996.

Conduct is the most common reason for small businesses. It covers behaviour issues - persistent lateness, failing to follow instructions, dishonesty or any deliberate breach of your policies. The more serious the conduct, the fewer warnings you need before dismissal. Gross misconduct can justify immediate dismissal.

Capability covers situations where the employee genuinely cannot do the job either because their performance is below the required standard or because of long-term ill health. Capability dismissals require more support and process than conduct cases, including giving the employee a real opportunity to improve.

Redundancy applies when the role itself is no longer needed. This is not a way to remove a difficult employee if you use redundancy as cover for a conduct issue and it comes out at tribunal, you will lose.

Statutory restriction covers situations where continuing to employ someone would break the law for example an employee who loses their driving licence when driving is a core part of the role.

Some other substantial reason is the catch all category for situations that do not fit neatly elsewhere for example an irretrievable breakdown of trust or a business reorganisation that does not technically qualify as redundancy.

You must be able to state which of these applies before you start any formal process. If you cannot, you are not ready to dismiss.

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Can you sack someone without warning?

Only in one situation: gross misconduct.

Gross misconduct is behaviour so serious that it destroys the employment relationship immediately. Theft, fraud, physical violence, serious harassment and deliberate breaches of health and safety are the most common examples. Your disciplinary policy should define it explicitly if it does not, a tribunal will apply a reasonableness test and the outcome is uncertain.

Even for gross misconduct, you cannot simply tell someone they are fired and walk away. You must still investigate, hold a hearing and give the employee a chance to respond before making a final decision. What changes with gross misconduct is that you can dismiss without notice and without working through previous warning stages.

For everything else performance issues, persistent lateness, repeated minor misconduct you must follow a staged process. Going straight to dismissal without prior warnings in a non-gross misconduct situation is one of the most predictable ways to lose at tribunal.

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The dismissal process, step by step

Step 1 - Investigate before you do anything

Before any formal action, carry out a reasonable investigation. For conduct issues this means gathering evidence, speaking to witnesses and reviewing any relevant documents or records. Write everything down as you go. Notes made at the time carry far more weight at tribunal than recollections written later.

If the situation is serious enough to justify suspension, suspend the employee on full pay while you investigate. Put the suspension in writing on the same day. Do not suspend someone and leave it verbal.

The thoroughness of your investigation is often what determines the outcome at tribunal, not whether the employee actually did what you think they did.

Step 2 - Write to the employee inviting them to a hearing

Once your investigation is complete, write to the employee inviting them to a disciplinary hearing. The disciplinary letter must include:

• →A clear description of the allegations against them
• →Copies of any evidence you intend to rely on
• →The proposed date, time and location of the hearing
• →Confirmation of their right to be accompanied by a colleague or trade union representative

Give at least 48 hours notice between sending the letter and the hearing date. Springing a formal hearing on someone the same day is a procedural failure that will be noted at tribunal.

Step 3 - Hold the hearing fairly

At the hearing, present the evidence and give the employee a genuine opportunity to respond. This means listening - not having already decided the outcome before they walk in the room.

Take notes throughout the hearing or have a second person present to do so. Do not announce a decision in the room immediately after the employee has finished speaking. Adjourn, consider the evidence properly and communicate the decision separately.

If the employee raises a significant new point at the hearing that you have not investigated, adjourn and investigate it before making a decision.

Step 4 - Communicate the decision in writing

Whether the outcome is a warning, a final warning or dismissal, confirm it in writing. A dismissal letter must state:

• →The reason for dismissal
• →The date employment ends
• →The notice period or payment in lieu of notice
• →The right to appeal and the window to do so

Do not rely on a verbal conversation. If it is not in writing it did not happen, as far as a tribunal is concerned.

Step 5 - Calculate final pay correctly

Final pay must include all accrued but untaken annual leave, any payment in lieu of notice and statutory redundancy pay if applicable. Errors in final pay create additional claims on top of any unfair dismissal proceedings.

Step 6 - Offer the right of appeal

Every employee you dismiss must be given the opportunity to appeal. The appeal should ideally be heard by someone more senior than the person who made the original decision. If that is not possible in a small business, the person hearing the appeal should approach it with genuine openness and document that they did so.

The appeal window should be stated in the dismissal letter - five working days is the standard minimum.

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How to dismiss an employee for poor performance

Performance dismissals follow the same basic process but require more groundwork before you reach the formal stages.

Before issuing any formal warning for performance, you need to have:

• →Set clear, measurable standards that the employee was aware of
• →Given the employee genuine feedback that their performance was not meeting those standards
• →Identified whether there are any underlying reasons for the poor performance - health issues, personal circumstances or inadequate training
• →Offered reasonable support to help them improve

A Performance Improvement Plan (PIP) is not a legal requirement but it is strong evidence that you gave the employee a fair chance before moving to formal action.

The formal stages for a capability dismissal mirror the conduct process: investigation, hearing, written warning, final warning and then dismissal if there is no adequate improvement. The difference is that the timeline is typically longer because you are giving the employee time to demonstrate improvement between each stage.

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How to dismiss an employee for lateness

Persistent lateness is a conduct issue, not a capability issue. The process is:

Start informally. Have a conversation, note that you had it and make clear what the expectation is. Many lateness issues resolve at this stage.

If the lateness continues, move to a formal verbal warning followed by a written warning. At each stage the conversation should cover whether there is an underlying reason for the lateness - childcare, transport, health - and whether any reasonable adjustments are possible.

If the lateness continues after a final written warning, you are in a position to dismiss. The key is that at every stage you followed the process, documented it and gave the employee a genuine opportunity to improve.

Do not dismiss someone for a single instance of lateness unless it is an extreme case with unusual aggravating factors. Even then, proceed with care.

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The mistakes that lose cases at tribunal

Having reviewed what goes wrong in dismissal cases, the failures fall into a small number of categories.

Skipping the investigation. The most common error. An employer is certain an employee did something wrong and moves straight to a hearing. The tribunal finds the investigation was inadequate and the dismissal was unfair, regardless of whether the employee actually did what was alleged.

Not giving enough notice of the hearing. Telling someone about a disciplinary hearing the day before or on the day, denies them a reasonable opportunity to prepare. Tribunals take this seriously.

Making the decision before the hearing. If your dismissal letter is already written when the employee walks into the hearing room, that is constructive evidence that the process was a formality rather than a genuine inquiry.

Inconsistent treatment. Dismissing one employee for behaviour that other employees have engaged in without consequence is strong evidence of unfair treatment, particularly if the dismissed employee has a protected characteristic.

Poor documentation. Employment tribunals are document-heavy proceedings. If you cannot produce a record of your investigation, your hearing notes, your warning letters and your dismissal letter, you are relying on memory against a claimant who has every reason to dispute your account.

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The new rules from January 2027

The Employment Rights Act 2025 introduces two changes that every small employer needs to know before January 2027.

The qualifying period for unfair dismissal claims drops from two years to six months. This means that an employee who has worked for you for six months on or after 1 January 2027 can bring an unfair dismissal claim if you dismiss them without following a fair process.

The statutory cap on compensatory awards is removed entirely. Currently the cap is £123,543. From January 2027 there is no cap. Compensation reflects actual financial loss. For a long-serving employee on a good salary, a tribunal award can now run into six figures.

Both changes make the process described in this guide more important than it has ever been - not less.

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Frequently asked questions

Do I need a solicitor to dismiss an employee?

No. A solicitor is not required. What is required is a fair reason and a fair process. If you follow the steps in this guide and document everything, you can manage a straightforward dismissal without legal representation. You should consider taking advice if the situation involves a protected characteristic, long service, complex redundancy or any allegation of discrimination.

What is the difference between dismissal and redundancy?

Dismissal is ending employment because of the employee's conduct or capability. Redundancy is ending employment because the role itself is no longer needed. They require different processes and carry different financial consequences. Using redundancy when you actually want to dismiss someone for conduct is a common and costly error.

Can I dismiss someone who is on sick leave?

Yes, but with considerable care. Dismissing an employee while they are on sick leave is not automatically unfair, but it carries elevated risk, particularly if the illness might constitute a disability under the Equality Act 2010. Take specific advice before acting in this situation.

What is a settlement agreement?

A settlement agreement is a legally binding document in which an employee agrees to waive their right to bring a tribunal claim in exchange for a financial payment. It requires the employee to take independent legal advice. Settlement agreements are useful when you want certainty that a departing employee will not bring a claim, but they are not a shortcut around a fair process.

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The documents you need before your next dismissal

Following this process is significantly easier when you have the right documents ready before a situation arises. A written disciplinary procedure, a set of template letters and a step by step checklist mean you are not writing things for the first time under pressure.

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This guide is for general information only and does not constitute legal advice. Employment law is fact specific. If you are uncertain about a particular situation, seek professional HR or legal advice before proceeding.