Law guide: Employment

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Termination of the contract

Termination of the contract

The end of a contract of employment

In general there are three main ways that an employment relationship can come to an end:

  • Termination by the employer (a dismissal)
  • Termination by the employee (a resignation)
  • Termination by mutual agreement

Expiry of a fixed-term contract

When a fixed-term contract is not renewed or a contract is entered into for a specific purpose and that purpose ceases, then the employee will be dismissed.

In the case of expiry of a fixed-term contract, if the contract is not renewed then, depending on the reason, the dismissal may be unfair and the employee will be entitled to apply for re-engagement or compensation.


Either an employer may terminate a contract or an employee may resign from their position giving the required period of notice. See – Employment Contract 'Important clauses' for further information on notice periods.

Where an employee resigns, it is advisable to interview that employee and ascertain the reasons for the resignation. The employee should be asked for a letter confirming the resignation and the reasons for it. Place the interview notes and the employee's letter on the employee's personnel file.

Wrongful dismissal

A wrongful dismissal occurs where an employee has been dismissed by an employer in breach of a term of their contract such as:

  • Failing to give contractual notice
  • Failing to follow a contractual disciplinary procedure

An employee who has been wrongfully dismissed can claim compensation in the Employment Tribunal, county court or High Court (depending on the value of the claim) (England, Wales and Northern Ireland) or the sheriff court or Court of Session (in Scotland).

Constructive dismissal

Constructive dismissal occurs where the employee resigns in response to the employer's fundamental breach of contract. In this scenario an employee may also qualify for claims of wrongful dismissal and unfair dismissal.

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