Employee termination and employee termination letter - steps, tips, and standard practices

What is the employee termination letter and when should you use it?

It’s the official written document that notifies an employee that he/she has been fired, specifies the next steps they need to take and clarifies how are they entitled to further compensation and benefits.

Note: There are other names used for the employee termination letter: pink slip, contract termination letter, letter of separation, a notice of termination of employment or employment termination form.

When should you use an employee termination letter?

• When it’s required by local or state law.
• You believe the employee does not qualify for unemployment.
• You want a written record of a termination in the event of a lawsuit.
• You want the employee to clearly understand why it is being terminated, to explain his next steps and to inform him about due compensation and benefits.

No federal law requires the employer to issue a letter of termination; still, the vast majority of them use these letters since are beneficial to both parties.

How to write a termination letter

Regardless of the reason you have for terminating someone, the professional move is to put it in writing. Here is all you need to include in your employee termination letter:
The basic data: the employee name, ID number, position, and department; the name of the manager or supervisor handling termination and don’t forget about the date - both of the letter of separation and the date the termination becomes valid if those dates are different.

• Reason for termination: in some cases, managers do not control a termination. They may be forced to lay off a very productive and motivated employee because the company is going through a bad period and needs to diminish the number of workers. On the other hand, poor performance may be the cause for the termination of indiscipline. Either way, said the employee has the right to an explanation and a formal letter is the best option for this.
• Company property: specify any company property employee is expected to return. It can be a simple key, a laptop or a company car.
• Compensation and benefits: include any salary, final paycheck or compensation the employee is entitled to. If you have an accrual system for paid time-off, chances are they already accrued some vacation time and you have to pay it.
• Final payments: make sure to specify the date when they can expect the final payments and the method used - in person, by mail, or direct deposit. If you have offered health insurance or a retirement plan, make sure to inform them about the ways to continue with said insurances or how much have they saved during their time in your company. Even though your work relationship ends here, they still have a professional future and this information will be of great help.
• Legal agreements: include a reminder of any legal agreements including non-disclosure, non-compete, etc. the employee has signed.
• End on a positive note: with some words of encouragement.

Writing the flawless termination letter - tips

Now you know what should a termination letter include. But we want to help you polish it. Here are some tips!

• Be concise and stick to the main topic: there is no need for discussing point by point what went wrong. Just state the reason and a short explanation.
• Use a proper business letter format and the company’s logo.
• Before beginning the termination process, check your employment agreement, employee handbook, and any other HR policy to fully understand your legal responsibilities as the employer.
• Use a respectful tone.
• Be wary and have a lawyer check the termination letter. You can also seek advice from the HR and Legal departments in the company. The letter must act as a protection for you as the employer, in case of a lawsuit.
• If you are keen on showing genuine concern, make sure to use the proper language.
• This can make the difference between a difficult and a smooth transition.

Reasons to fire an employee

Firing is by nature a difficult process. Don’t make it worse by not knowing how to proceed in these cases. It could lead to an expensive lawsuit.

Termination at will vs termination for cause

Unless state law or the employment contract state the opposite, the general applied rule is employment at will. This implies that employees can be terminated for any reason or for no reason at all. However, you cannot use a discriminatory consideration, such as gender, age, disability, ethnicity, etc. to terminate them.

On the other hand, termination for cause involves firing an employee for a specific reason: indiscipline, violating the code of conduct or laws, breach of contract, unethical behavior, unsafe behavior, harassment and more.

Let’s go through the reasons employers invoke for terminating:

It’s one of the most common reasons for firing an employee. As the employer, you first have to show interest in correcting that bad behavior, regardless of how little it affects the organization. Keep track and records of every action you take in this process. If the employee does not revise his behavior, you should terminate his employment contract, so as not to set a bad example.

Every successful organization operates on established performance goals. Everyone has to meet those goals. If your employee fails at this, give him a chance to improve, offer another session of training and maybe things will get better. If not, consider moving him on another position. The last alternative is to terminate him.

If employees frequently disregard the company policy related to their schedule, you have a cause for termination. Be sure to document each case of tardiness or absence and inform them about the consequences of their behavior.

Once again, you have to be extremely specific and have written records of any incidents when using this reason for termination.

You can think about terminating an employee in the following cases:
-refusal to perform tasks that are part of the job description
-refusal to execute legal and ethical directives given by managers
-disrespects managers and supervisors

Employers who have a careless attitude towards sexual harassment complaints can be compromised and may be held responsible for a hostile work environment. If you have clear evidence to support a sexual harassment charge, document it very well. If the evidence is vague and the employee works at-will, it may be better to fire them without offering a reason.

Employment Termination Form

Checklist for terminating employees

Terminating an employee can be painless if you follow a simple checklist. Even though it’s a process that no-one enjoys, it should be done civilly. Here are some directions to follow, our visual checklist can be downloaded for free!

1. How much notice should you give?
So the first step is to consider the notice period. If you are ending the employment relationship politely, you will prefer the employee to remain for two weeks (the standard notice period), to help train someone new and make the transition more pleasant. On the other hand, if the reason that caused the firing is troublesome, you may want to consider terminating the employee immediately. This could prevent him from creating a bad atmosphere among the team.

2. Which day to pick for terminating the employee?
We have 2 options. If the employee is a calm one, without any history of undisciplined behavior, you could have “the talk” at the beginning or middle of the week. This will benefit him, since he will be able to look for alternative job options during the week, on business hours.
If you are handling an unpredictable employee, the best day to terminate him is Friday, so he has the chance to cool off on the weekend.

3. Inform the employee of termination
If you are about to terminate an employee who works in the company’s headquarters, it’s best to meet face-to-face and inform him about the end of the employment relationship. This will also require him handing over keys, ID cards, or any kinds of accesses.
If the employment was a remote one, the way to go is to send a termination letter. (And you already know how to write one and you can use one of our samples).

4. End compensation and benefits
Payroll - The employer has to end all payments or salaries to the employee. In the case of severance, the employer’s payroll service should be notified.
Benefits - All benefits the employee had, should be ended or transferred, if possible. For example, in case the employer offered health insurance after the termination was concluded, the employee is responsible for finding short-term insurance coverage on their own.

Notice period

The majority of employment relationships are "at-will,'' which means the employer has no obligation to give notice to the employee. There are cases when the employee is under contract or covered by a union agreement/collective bargain and these documents imply a notice period.

The Worker Adjustment and Retraining Notification Act (WARN) stipulates that employers with more than 100 employees are required to provide 60 days' notice in the event of a mass layoff or plant closure.

State of local laws may have different regulations, that is why we recommend you always consult the legal department or even a lawyer before terminating an employee.

Conclusion

We hope we managed to answer all your questions regarding terminating employees and the documents you should write in such cases (termination letter and email). Our tips for writing the perfect letter are that small push you need. We know it’s one of the most difficult tasks an employer can face.

If you are the employee that wants to resign, don’t worry! All your questions can be answered easily, by reading our piece on resignation.