How to Avoid Wrongful, Unfair Dismissal Compensation and Claim?

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Date published: 5 Jul 2020
by DocPro Legal
Last Update: 9 Mar 2021



As an employer, the process of dismissing employees is an inevitable one. Dismissal of an employee may occur for any reason; your employee may have been underperforming, negligent, or they may have simply been a bad fit. This article is about how to lay off an employee in ways that will minimise potential lawsuits for wrongful or unfair dismissal claim whereby the dismissed employee seeks unfair dismissal compensation against the employer.


The following are some steps you could take as an employer to protect yourself and your company and to defend any wrongful or unfair dismissal claims which arise.


A. What are wrongful and unfair dismissal claims?


Employment regulations differ throughout jurisdictions, but there is a general thread regarding when an employee can or cannot be terminated.

Wrongful dismissal refers to the situation where dismissal is in breach of the employee’s contract. Rather than a statutory claim protected by the law, this dismissal deals with the contract signed by the two parties as employer and employee.


Examples of wrongful dismissal include where the employee is dismissed without prior notice as agreed in the employment agreement. In some jurisdictions, going against the policy in the company handbook constitutes wrongful dismissal even though the employee did not sign or agree to the policy in the company handbook.


Unfair dismissal, on the other hand, refers to where an employer terminates employment without a demonstrable reason, thus violating the statute. Situations constituting unfair dismissal may include dismissing a pregnant employee or dismissal based on race.


Most countries have a statute which prevents employers from dismissing employees for reasons relating to gender, race, sexual identity, and age. In some jurisdictions, unfair dismissal may also include dismissals which are reasonable but do not follow the correct procedure.



B. What is a fair dismissal?


So what would constitute a fair dismissal? Fair dismissals are based on reasons which do not fall on either of the above categories. Depending on the jurisdiction, these can include:

  1. Unacceptable workplace conduct

  2. Under-qualification or capability mismatch of the employee with the work tasks required

  3. Employee redundancy caused by insufficient work or market conditions

  4. Statutory duties or restrictions which prohibit employment (e.g. visa issues, age restrictions)

  5. A substantial reason which justifies dismissal


C. How is Unfair Dismissal Compensation Calculated?


The calculation of unfair dismissal compensation varies country by country, but it generally follow the following basic principles:

  1. How much money can the employee make if not dismissed is the starting point for any compensation.
  2. How much money the employee has made since the dismissal to be subtracted from the amount above.
  3. Any reduction in compensation resulting from the employee's misconduct relating to the dismissal.
  4. What steps the employee has taken to mitigate the losses (any proactive step to find a job).
  5. Any compensation cap imposed by the country (if any) - generally compensation will not be unlimited.


D. How can I prevent being accused of wrongfully or unfairly dismissing an employee?


With the three categories above being defined so widely, your main concern as an employer, therefore, is to avoid being wrongfully accused of wrongfully or unfairly dismissing an employee.


The process of dismissal may be a complicated and risky process, but it is fundamental for employers to tackle dismissal properly in order to avoid short and long term repercussions including legal costs and even a tank in company reputation.


Read on for some tips on handling dismissals properly and avoiding litigation:


1. Give the Employee a Chance to Improve


When you see an employee acting in a dissatisfactory way, before you dismiss them, it is important to give them a chance to improve. Your employee may be inexperienced or unfamiliar with the company culture and dismissing them outright is not ideal. Instead, it would be appropriate to give them a warning first.


Make it clear that their employment is at risk unless they rectify the situation.

It would be best to put the warning in writing to have proof of the dismissal process in case of a trial.


The following links are templates for warning letters to your employees:


Employee warning letter


Notification to Employee

-       Warning of poor performance


Notification to Employee

-       Review to improve performance



2. There Must be a Valid Reason for Dismissal

When you are considering whether or not to dismiss a certain employee, you must ensure that you have a valid and reasonable reason for dismissing that employee. That reason must be related to their capability or conduct, must be sound and well-founded, and cannot be out of prejudice or bias.

Reasons for dismissal may vary by jurisdiction but generally, with regard to capability, employees may be dismissed due to: not having the requisite technical skills; inability to fulfil the language requirement, or; taking unreasonable long term absences from work.


Concerning conduct, employees may be dismissed for being repeatedly late to work; being drunk; acting inappropriately towards other coworkers, or; not working during work hours.

As stated earlier, there are certain reasons which you may not use as a basis to dismiss an employee. Reasons you cannot fire your employee includes gender, race, pregnancy, sexuality, and age. In some jurisdictions, it is illegal to fire your employee for the above reasons and if found to have fired an employee for these reasons, it may land you in trouble with the law. Therefore, it is essential to ensure that you are dismissing an employee for a valid reason.


3. The Employee Must be Notified of the Reason for Their Dismissal

Aside from having a valid reason, you should ensure that your employee is notified of the reason for their dismissal. This should be done before they are officially terminated not as a legal requirement, but out of common courtesy.


Considering the situation from the employee’s perspective, they would want to know why they are being dismissed - either for closure or to improve in the future. If you can provide them with a valid and substantiated reason, it is more likely that the employee will accept the decision of the termination. This situation is ideal as the dismissal is on more amicable terms and chances of litigation become unlikely.

Do note that the notice period for dismissal should follow the period stipulated on the employment contract. The dismissal, as well as the reason for dismissal, should be in writing as well to ensure that there is a record.


The following are templates that can be used for the termination of an employee:

Employee termination letter

A termination notice to an employee

-       Misconduct


A termination notice to an employee

-       Poor performance


A termination notice to an employee

-       Layoff


A termination notice to an employee

-       Absence from work



4. Let the Employee Have an Opportunity to Respond

After the termination notice has been served, the employee must be allowed an opportunity to respond to the reason for dismissal. Your employees are also people and it is important to meet with them and understand what they are going through.


They may be having a personal crisis or hardship or having difficulties in the workplace. Be empathetic - listen to and negotiate with your employee whilst showing compassion and understanding as an employer and as a human.

If after the meeting you find that the situation is salvageable, you may choose to rescind your termination notice. If an acceptable compromise cannot be found, then going ahead with the termination may be the best option.


It is also a good idea to keep a record of the meetings such that if the employee continues to act in a dissatisfactory way even after being warned and promising to improve, there is more justification to terminate their employment and dismiss them.

5. Provide Support to the Employee

In the course of discussing their termination and dismissal, the employee should be allowed to have a support person present. While you are not legally obliged to do so, it would reflect your compassion as an employer and help the employee feel less intimidated.


In situations of dismissal, the employee may feel like there is a great power imbalance in play as they are up against a corporation instead of a fellow employee. Having a support person would allow them to feel more at ease in such a situation and would contribute to the smooth flow of such discussions.

6. Follow Dismissal Protocol

As previously stated, even if the reason for dismissal is neither unreasonable nor unfair, the termination procedure may still be litigated on if proper dismissal protocol is not followed. You must ensure that any allegations against the employee are investigated thoroughly and proven to be true.


You must also ensure that any termination follows both company policy as well as any policy or agreement stated in the employment contract. If you have staff in human resources, it may be best to get their help to ensure protocol is being properly followed. Failure to follow procedure and company policy may lead to a successful unfair dismissal claim on the grounds of procedural irregularity.




D. Other General Management Measures

Aside from the above, there are many things you can do as an employer to prevent being accused of wrongful or unfair dismissal even before the dismissal occurs.


1. Establish Roles and Duties of Your Employees

To begin with the process of onboarding, it is important to clearly establish the roles and duties of your employees. Employees should clearly understand what is expected of them as well as their responsibilities in the office.


If their roles and responsibilities are not expected to change in the course of their employment, it would be ideal to detail their roles and responsibilities in their employment contract. Also, make it clear which members of staff are allowed to hire and terminate employees, which establishes a hierarchy of staff to which employees answer to. These things will avoid any confusion as to their responsibilities and roles in the office and serve as proof if any conflict arises.

2. Set Up Employees Protocol and Dismissal Procedures


Employers could set up a concrete protocol on dismissal procedures which include requiring dismissal notices to be in writing, requiring meetings before dismissal, and even keeping a record of what is being said in meetings as well as other exchanges in the workplace.


Having a concrete framework firstly prevents any misunderstanding between you and your employees as to how dismissal works and what rights are offered to them. Having concrete protocol which requires things to be in writing also allows for there to be a record of evidence, supporting any claims you may make in court. A good idea would be to have a human resources representative in the workplace who is trained to handle such protocol and different types of workplace conflict.

3. Foster Good and Harmonious Working Environment


Sometimes, conflict in the workplace will arise due to differences in opinion, behaviour, and personalities. This is perfectly natural and is difficult to avoid. However, it would be helpful if such conflicts could be avoided by creating a harmonious workplace environment.


This is because small conflicts which arise from inherent differences tend to escalate and open up conflicts which become grounds for dismissal.  Employers can foster a good and harmonious workplace environment by putting into place different team-building exercises.


These include regular weekly meetings to discuss expectations, team-building events to create healthy relationships or feedback sessions for employees to ask questions and discuss different issues with their superiors.

4. Can I dismiss an Employee Immediately without following Protocols and Procedures?


You may be able to dismiss an employee immediately in the situation of gross misconduct. In such circumstance, you do not need to give an employee any additional pay or notice, but you should retain records and evidence of misconduct in case it is challenged by the employee. In other circumstances, you should give an employee pay in lieu of notice when you are dismissing him or her. You would want them to leave immediately, rather than hanging about disgruntled, potentially stealing your customers, business secrets, create havoc on your company or spread rumours amongst other employees.


That said, on-the-spot dismissals should be avoided as much as possible. As much as we see them in movies, on-spot-dismissals cause a large amount of strife, blatantly go against procedure and may cause problems in terms of the protocol as well as potential litigation. Of course, there may be situations where an employee acts so unreasonably that you may wish to dismiss them on the spot. Even in such situations, you should ensure that there is another manager or senior supervisor in the room to diffuse and evaluate the situation before you decide to dismiss them.



E. Conclusion


Dismissals are a difficult and painful yet essential process of running a business smoothly. Not dismissing any employee properly can lead to litigation regarding wrongful or unfair dismissal, causing damage to the company’s funds and image.


Despite the risks, employers should not retain unsuitable employees out of fear of legal repercussions but instead should take positive steps to ensure and protect themselves from such litigation. The more positive steps that are taken, the more amicable such a dismissal is likely to be, and the less likely you will suffer repercussions as an employer.


Please note that this is just a general summary about unfair dismissal under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may want to speak to your local legal adviser. 


Wrongful Dismissal


Unfair Dismissal


Unfair Dismissal Compensation


Wrongful Dismissal Claims


Unfair Dismissal Claims








Wrongful Termination
















Employee Termination


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