Managing Voluntary Resignations in SMEs

Practical Guidance for Owner-Managers

Voluntary resignations are a normal part of running a small or medium-sized business. Handled poorly, they can create disruption, legal risk, or diputes regarding notice, pay or the circumstances of the employee’s departure. For SME owner-managers, managing resignations professionally is about ensuring the resignation is genuine, clearly documented, and treated fairly and consistently.

This guidance provides practical steps to manage departures smoothly and compliantly.

Confirming the Employee’s Intent to Resign

The first and most important step is to establish that the employee genuinely intends to resign.

Verbal or Heat-of-the-Moment Resignations

Employees may resign verbally during an argument or while upset or under pressure. Accepting these resignations immediately can be risky.

Best practice:

Failing to follow these steps could result in claims that the resignation was forced or not genuine.

Genuine Resignations

Once a resignation is confirmed in writing:

Written confirmation protects both the business and the employee from future misunderstandings.

Handling the Notice Period

The notice period should be clearly set out in the employee’s contract. If there is no written contract, statutory notice rules will apply.

Key steps for owner-managers:

If you agree to shorten the notice period, document this clearly and confirm how pay will be handled.

Planning a Practical Handover

In SMEs, a poor handover can significantly disrupt operations. Planning early ensures continuity.

Practical handover steps:

Keep handover expectations reasonable and proportionate to the role and notice period.

Managing Holiday During The Notice Period

The part year entitlement should be calculated from the start of the holiday year to the date of leaving inclusive (not complete months or weeks). From their deduct the number of days taken and let the employee know whether they have under or overtaken their entitlement.

Requests to Leave Early

If the employee wants to leave early they may ask to use some holiday during their notice period. Similarly, if you don’t want them to work their full notice period you might ask them to use their entitlement during the notice period.

Dealing With Unused and Overtaken Entitlement

If their is unused but accrued entitlement at the end of the notice period this must be paid in lieu to the employee with their final pay. Ensure holiday pay reflects normal pay (including regular overtime or allowances where applicable). Failing to pay unused statutory holiday can lead to claims.

If an employee has taken more holiday than they have accrued, you should be able to recover the excess from the final pay. Before making any deductions check the wording of your contrac as deductions for overtaken holiday must be contractually permitted. If there is no contractual right, deductions may be unlawful.

Common Pitfalls

When to Seek Advice

Seek HR advice if:
Early advice can prevent escalation and protect the business.

Key Tip for Owner-Managers: Holiday entitlement on leaving is one of the most common causes of disputes — but also one of the easiest to manage well. Clear calculations, written confirmation, and consistent treatment will protect your business and ensure a smooth exit.

Managing Final Pay

Final pay disputes are a common source of conflict for SMEs and are relatively easy to avoid with careful checks.

Final pay may include:
Before processing final pay:

Exit Arrangements and Company Property

Before the employee leaves:
After the employee has left update alarm and other access codes.

Exit Interviews (Optional but Valuable)

Exit interviews are not essential, but in SMEs they can provide valuable insight. If you conduct one:
Make clear that participation is voluntary.

Providing References

Have a consistent approach to references:
Key Tip for Owner-Managers: Consistency reduces the risk of claims.

Communicating the Exit

Announce the resignation to staff and clients early to prevent gossip.
Reassure staff about job security and workload adjustments.
Assign responsibilities clearly during the transition.

Reassess the Role

Consider if the role is still needed or can be restructured.
Explore combining responsibilities with other positions.
Involve staff in the recruitment process if relevant.
Prepare a training plan for replacements to reduce costs and transition time.

Document Everything

Throughout the resignation process:
Clear documentation protects the business if questions arise later.

When to Seek Advice

Owner-managers should seek HR advice if:
Early advice often prevents escalation to and protect the business from a tribunal claim .

Key Takeaway for Owner-Managers

Managing resignations professionally does not need to be complex, but it does need to be careful, consistent, and documented. By confirming intent, handling notice periods properly, planning handovers, and ensuring accurate final pay, SME owner-managers can reduce risk, protect the business, and maintain positive professional relationships — even when employees move on.

Have a question about the KEA Tips and Tools? Speak directly with our CIPD-qualified HR expert with 30+ years’ experience.

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