What is a notice period?

What is a notice period?

A notice period defines the length of time from when the employee or employer decides to terminate the employment agreement and the moment that it ends. It’s intended to allow both parties to adjust accordingly before the final step is taken.

For instance, if an employee resigns, the notice period gives your company a chance to cover the position, conduct an exit interview, and start looking for a replacement. If you terminate the contract, it gives the employee a chance to start looking for a new job.

As an HR leader of a global team, it’s crucial to understand how notice periods work in the countries where you hire. This is because the concept and practice of notice periods can differ greatly, due to both local labor laws and diverse cultural practices.

In the US, for example, the principle of "employment-at-will" is common. This means that either party can end the employment relationship at any time and for any reason, as long as it’s legal. In many cases, there is no statutory notice period, although certain labor laws — such as the WARN Act — require some companies to provide substantial notice.

Conversely, in the UK, there is a minimum statutory notice period. If your employee resigns, they must — by law — provide at least one week’s notice. If your company terminates the contract, you must provide one week’s notice for the first two years of employment, plus an additional week for each extra year.

In many countries, notice periods depend not just on the amount of time worked, but on the seniority level of the employee. For instance, senior managers and SMEs may often be required to work a longer notice period.

It’s also important to note that notice periods can sometimes be voided. For instance, if your employee is dismissed in the UK for gross misconduct (i.e. theft, violence, or sexual harassment), you do not have to give or honor a notice period.

Notice periods should always be set out clearly in the employment contract, and should generally include:

• A full breakdown of periods required based on time worked and seniority level

• The process for issuing a notice

• Any deviations based on the type of dismissal (i.e. what happens in case of furlough, layoffs, or employee misconduct)

Adhering to a notice period

If you decide to end an employment contract, you must follow your company’s termination policy, which, in turn, should comply with local employment law. This includes adhering to the specified notice period.

If you don’t honor the notice period, your employee may be entitled to take legal action against you, potentially resulting in financial damages and reputational harm.

Consider, too, that an abrupt or unexpected termination can also negatively impact team morale and productivity. It may lead to distrust, fear, or uncertainty among other employees, and undermine team cohesion and performance.

During the notice period, it’s a good idea to maintain a clear and open communication channel with the employee. If you are ending the contract, ensure that you have clearly explained the reasons, and do your part to contribute to a respectful, productive, and legally compliant process.