5 ways to end an employment contract

The relationship between employer and employee is, at its root, a contractual one – with the contract of employment at its base. You might think that ending the relationship simply involves ‘ending’ the contract. However, the law recognises several different ways in which a contract of employment can come to an end – and each comes with different legal consequences.

1.        Dismissal

In this case, the employer brings the employment contract to an end. If the employee has over two years’ service, they may claim unfair dismissal by claiming that the employer didn’t have a fair reason or didn’t follow a fair process.

2.        Resignation

This is when an employee ends their contract voluntarily, usually with notice. Be aware that a resignation can give rise to claims if the employee feels forced out (see below).

3.        Constructive dismissal

This happens when the employee resigns in response to the employer’s serious breach of contract – for example, cutting their pay or changing their hours without agreement.

4.        Frustration

This happens rarely. In this scenario, the contract ends because something happens that makes it impossible for the contract to continue, for example the death or imprisonment of an employee. This ends the contract automatically, without action from either side.

5.        Termination by mutual agreement

This can happen, for example, via a settlement agreement, where both parties agree to part ways on specific terms.

Understanding the difference between these forms of termination is key to managing risk and supporting fair outcomes. Get it wrong, and the consequences can be costly.

Further reading

• About dismissals — ACAS
• Could alternative employment be better than redundancy? – Hunter Law
• Code of Practice on “fire and rehire” in force – Hunter Law
• EAT stresses the need for proper consultation in redundancy cases – Hunter Law
• Redundancy is on the rise: 9 essentials for employers – Hunter Law

---