What to do when an employee leaves

Running a business can be incredibly rewarding, allowing you to build a team of passionate workers who support you in delivering products and services to customers. For smaller business, a tight-knit team can feel like a second family that has grown alongside the business.

Read our comprehensive guide to ensure you manage the situation effectively and have everything in hand when an employee leaves. 

Hold a conversation

Ask the employee what their reason for leaving is and whether there is something you could do to stop them leaving. If they are a good employee, taking reasonable steps to keep them may be worth it. It’s easier and more cost effective to retain a good employee than hire a new one. 

Acknowledge the resignation

It’s important to acknowledge and accept the resignation. In doing so you can confirm the last day of employment and any agreements reached on notice period and expectations before departure. Set out any adjustments to final payment, holiday pay owed or due or personal expenses or repayment of travel card loans, training fees recoupment. 

Fill the vacancy

If you need to hire someone else to fill the role, it’s important to get a job advert out as soon as possible to maintain efficient business operations. Depending on the notice period of the individual leaving you may not have long until they leave. 

Writing a comprehensive job description will help to attract the right people and should detail: 

• What the work entails 
• Role responsibilities 
• Qualifications and experience required 
• Benefits package and training and development opportunities 

You may want to look at using a recruitment agency as well as free of charge routes such as your own website and social media platforms to fill the vacancy. Other jobs boards, such as Indeed, or a local job listing website are also useful tools. 

Other things you may need to consider are: 

• Make sure to revoke the employee's access to systems after they leave and collect or update passwords. 
• Make sure to retrieve any business-owned equipment from the employee when they leave, such as laptops and other IT equipment, keys and passes and bank cards. 
• Let stakeholders know of the employees departure if they were in a customer-facing role. Introducing them to their new contact may be necessary to reassure them that the service will continue. 

Follow the Notice period

An employee’s contract should advise their notice period. This is the period of time they are required to work after giving their notice. This period may be weeks or several months, and the length of notice is usually dependent on someone’s seniority.  

If appropriate, you may mutually agree that an employee doesn’t need to work their notice period. You can ask the employee not to work their notice, but they should be paid for their notice period regardless. These payments are referred to as Payments In Lieu Of Notice (PILONs) and will be set out within a contract. 

The notice period is important to ensure that any tasks and responsibilities the individual has are handed over to another person. It may also be necessary for tasks to be documented so that these can be replicated once they leave. 

Calculate Annual leave remaining

When you look at remaining annual leave, it's important to ensure that you calculate it correctly. Depending on when in the year they leave, the employee may owe you annual leave or they may need to take this prior to their leaving date.  

You can choose to pay the employee for this annual leave instead of them taking the time. You should have a discussion to reach a mutual decision. 

Book an exit interview

Holding an exit interview can provide an insight into your business operations and workplace culture. Create a list of questions for the employee who is leaving. Ask about their experience, why they are leaving, and any suggestions for improvement. 

The feedback you gain at this interview will be essential for you to: 

• make necessary adjustments if required
• enhance the work environment for remaining and future employees
• confirm any reference details, including who to contact and their reason for leaving
• remind of any contractual agreements such as restrictive covenants 

Organise a leaving event and card

Organise a leaving event and send a card around the team to sign as a gesture of farewell and to improve positive employee relations. You may want to ask for donations towards a leaving gift for the employee. 

As an employer, you can spend £50 on a leaving gift without tax implications under the trivial benefits rules. 

Issue a P45

When an employee leaves, it is your legal obligation to give them a P45. This form can be prepared using your payroll software or using a blank form from HMRC. The form summarises your employee’s details including their total earnings and tax they paid while in employment for the current tax year. A P45 is needed by the individual to give to their new employer. 

To issue a P45, you can use your payroll software, you’ll need to add the employee’s leaving date into your software. If you have outsourced your payroll you need to let them know the date the employee is leaving. 

How TaxAssist Accountants can help 

Our team of accountants work closely with you in all aspects of your business including employment. If you’d like support as an employer speak to our friendly team today. Call us on 01444 620144 or use our online contact form. 

Date published 24 Jul 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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