What is the effect of an employee working beyond their notice period?

Where employment has continued beyond the termination date agreed between the parties this could have invalidated the original notice of termination by making the date that the employment terminates unclear. It is a requirement of valid notice that the notice be clear and unambiguous. We note that here it would be a case of a previously (we assume) valid notice becoming unclear through subsequent events rather than being flawed from the start. We are not aware of any case law on how this would affect the position.

In any event, it is possible that the parties have agreed a change to the terms and conditions between them through their actions. As you will know, the difficulty with unwritten changes to terms is proving exactly what was agreed between the parties. The position would come down to what could be proved at tribunal if a claim ensued.

Depending on the facts, it could be that the notice of termination was retracted entirely or that the notice period has been extended. If the notice of termination was retracted then the employment would continue until brought to an end so the employee would potentially need to give a further notice of termination and serve a further period of notice. Alternatively, if the notice period was extended, the later date of termination would need to be made clear in order to be valid (see the initial paragraph above).

The parties would need to bear the PENP position in mind. As long as there is no unserved period of notice using whichever is greater of the employer's contractual or statutory notice periods (section 402E(4), ITEPA 2003), a PENP calculation would not be required. However, if the employee were required to serve notice again but by that point their work was complete and the parties agreed the employee would not serve their second period of notice, this could affect the PENP calculation. Even if the PENP calculation does not change the employer would need to ensure that any documentation sent to HMRC reflected the later termination date or it could appear the parties were seeking to avoid tax and NICs payments on any additional salary paid to the employee.

The employer would also need to make sure the documentation reflected the correct termination date for other reasons too. For example, post-termination restrictions will take effect from the date of termination so a lack of clarity on when these will run from could lead to disputes.

It is hard to comment on whether the employer has lost the opportunity to terminate the employment but, ultimately, if the employer wants certainty and still wants the employee to leave it should document the fact that the notice period has been extended by consent and record a new termination date.