A notice period is the time between the notification of an employee’s resignation or termination and the employee’s last day of employment.
In most cases, employees must notify their employer before departure to give the company a set period to prepare before they leave. The employer must also inform the employee of termination and give them time to prepare to leave the job.
The notice period typically begins once the employee submits a resignation letter or when the employer gives notice of dismissal and ends on the last day of work.
Types of notice periods
The type of notice period an employer implements into their work policy depends largely on the employment regulations of the country where they operate. Some common notice periods include the following:
Statutory notice period
A statutory notice period is a legal minimum notice an employer can give to a departing employee to maintain compliance with local employment laws. The notice period length is typically determined by the amount of time that the employee has been working for the company.
For example, in Germany, the minimum statutory notice period is four weeks and takes effect either on the fifteenth day or the end of a calendar month. However, the notice period increases depending on the length of an employee's employment.
Germany’s statutory notice periods include the following:
- Two years employed receives one month’s notice
- Five years employed receives two months’ notice
- Eight years employed receives three months’ notice
- Ten years employed receives four months’ notice
When creating international employment agreements for foreign talent, you must ensure the stated notice period aligns with the statutory requirements of the country in which you’re hiring.
Contractual notice period
A contractual notice period is specified in an employee’s work contract when they accept the position. The notice period length can vary based on the type of employment contract but cannot be less than the statutory minimum notice period.
For example, if an employment contract states that the notice period is two weeks, then the employer or employee must provide at least two weeks’ notice before terminating the contract. Other types of employment contracts may state that the employee must work for a certain number of years for the notice period to apply.
Probationary notice period
A probation period is a trial period for a new employee. Probationary periods vary based on local employment laws or business policies.
For example, while probationary periods are not required in the United States, U.S. businesses typically set a probationary period for new hires between one and six months.
During the set probation period, the employer or employee might determine the employment is unsuccessful and should end. In this case, they can mutually agree to terminate the employment contract with a shorter notice period.
Pay in lieu of notice
Pay in lieu of notice occurs when the employer offers to pay the employee on the day of resignation or dismissal instead of providing a notice period. Payment in lieu includes the same compensation and benefits the employee would have earned during the typical notice period.
Gross misconduct
Gross misconduct is any unethical or unprofessional behavior an employee engages in within the workplace. If an employer dismisses an employee due to gross misconduct, the employer may immediately terminate employment without a notice period or pay in lieu of notice.
How long is a typical notice period?
Notice periods depend on the type of contract and local employment laws, but the typical notice period for employees is two weeks to one month.
For example, the minimum required notice period in the United Kingdom is one week. The U.K.’s statutory notice periods based on length of employment include the following:
- One month to two years employed receives one week’s notice
- Two years to 12 years employed receives one week for each year of employment
- Twelve years employed or more receives 12 weeks’ notice
Indefinite contracts typically mandate lengthy notice periods to protect employees from sudden termination, whereas limited-term contracts define precisely when the employee-employer relationship can end.
In contrast, the United States practices at-will employment and does not require notice periods by federal law unless stated in the employment contract.
Still, many employees and employers may choose to offer extended notice periods beyond what they're legally or contractually obligated to follow.
For example, if an employee sends in their resignation, they may offer to stay on longer than the required notice period to help their employer hire or train their replacement.
Why are notice periods important?
Though notice periods are not required by law in all countries, they benefit all organizations that choose to implement them into their employment agreements. Notice periods are important for helping both employers and employees with the following:
- Establishing a timeline for the employee’s departure
- Creating a straightforward process and smooth transition during an employee's resignation or termination
- Managing relationships and expectations in the workplace
- Giving the employer time to find a replacement for the employee who resigns
- Allowing departing employees time to search for a new job or prepare for the next step in their career
- Providing both the employer and employee an opportunity to part ways on good terms and maintain a positive reputation
How does a notice period system impact company culture?
Notice periods help promote transparency, respect, and trust within an organization and contribute to healthy employer-employee relationships. In turn, these relationships enhance morale, productivity, and company culture.
How to implement an effective notice period system
Employers can implement an effective notice period system with the following methods:
- Include the notice period in the employment contract. Explain the notice period policy clearly in the employee’s contract, relaying the employer and employee obligations.
- Offer incentives. Provide incentives such as severance pay or a discretionary bonus to encourage employees to provide notice of their departure if notice is not legally required.
- Conduct performance reviews. Document unsatisfactory or negative employment behavior in performance reviews, and address problems before they escalate.
- Train managers. Ensure managers and HR staff receive adequate communication and problem-solving training to identify and address dissatisfied employees.
- Practice goodwill. Demonstrate courtesy and proper etiquette during the notice period so both the employer and employee part on respectful terms.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. You should contact your attorney or tax advisor to obtain legal and/or tax advice with respect to your particular situation. Only your individual attorney or tax advisor can provide assurances that this information—and your interpretation of it—is applicable or appropriate to your specific situation. All liability with respect to actions taken or not taken based on this information is hereby expressly disclaimed. All content is provided "as is," and Velocity Global makes no representations or warranties concerning this information.
