Terminating an employee is one of the most difficult aspects of being an employer or HR professional. Many rush through the process to make it less painful, but this is often a mistake. Terminations should follow a series of best practice guidelines to ensure that employers and employees part ways on amicable terms whenever possible. Doing so may also help protect the company from potential litigation and preserve the engagement and productivity of the remaining workforce.
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What is termination of employment?
Job termination is the end of an employment relationship. It triggers offboarding, which transitions the former employee out of the organization. This process generally involves a significant amount of work in a short time frame, including finalizing payroll, completing tax paperwork and retrieving company property.
What are the types of termination of employment?
The decision to part ways may be made by the employer (involuntary termination) or the employee (voluntary termination).
Voluntary termination
Voluntary terminations occur when employees resign or retire from an organization of their own accord. Two weeks’ notice is customary with these separations, giving employers time to transfer knowledge and responsibilities to other team members. In addition to training replacements, the departing employee may also be asked to sign an official resignation letter.
Involuntary termination
Involuntary terminations are often not only uncomfortable and emotional, but also logistically complicated and subject to potential employee claims. They may be triggered by employee misconduct, but such behavior isn’t always predictable. For this reason, it’s important for employers to have termination policies in place.
Termination vs. layoffs: Is there a difference?
Layoffs are a type of involuntary termination that occurs through no fault of the employee. Companies usually lay off workers when they experience financial issues or pursue a different strategic path with their workforce. Employees who lose their jobs in this manner typically qualify for unemployment.
Additionally, employers may have to notify employees in advance of layoffs, whereas terminations might be unannounced until the day of separation. Employers should refer to the federal Worker Adjustment and Retraining Notification Act (WARN), which requires businesses with 100 or more employees to provide 60-day notice of mass layoffs or plant closures. Some states have stricter notification requirements and may even entitle laid-off workers to severance pay.
Reasons for termination of employment
Justifications for termination are not always clear-cut. An employee who embezzles money from the company might be dismissed immediately, whereas an employee who follows the rules but isn’t a strong performer presents a more difficult decision. Ultimately, employers must do what’s right for their business while complying with all applicable laws when faced with:
- Malfeasance: Employees may be dismissed for engaging in misconduct, such as policy violations, insubordination, theft and workplace violence.
- Poor performance: Employers may release employees if they are not meeting performance standards, including attendance expectations.
How to terminate an employee
Terminations generally should only occur after an employer has fairly and consistently worked to improve an employee’s behavior or performance, and has conducted a prompt and impartial investigation. When those measures fail, the following steps may be necessary:
1. Prepare in advance
Employers should review company policies, procedures and past precedents to ensure they follow established protocols. They may also want to prepare what they want to say and anticipate how the employee may respond.
2. Communicate with IT
IT should know when to retrieve company-issued devices (laptops, cell phones, etc.) and disable the departing employee’s access to proprietary technology. If the individual has company or client data on a personal device, that information should be removed as well.
3. Meet in person
Termination discussions should occur in person unless it’s physically impossible to do so. A qualified HR representative or other manager may also be present to answer questions or serve as a witness.
4. Choose the right time and location
Considering the circumstances, employers should budget an appropriate amount of time for the termination meeting. A private room is ideal so employees don’t worry about others overhearing the conversation. Employers may also want to consider holding the meeting when fewer people are in the office so the terminated employee will not have to collect their belongings when colleagues are present.
5. Be honest
It’s important to tell employees the truth about why they are being let go while maintaining a positive and professional attitude. Employers should avoid blaming anyone else within the organization for the termination or apologizing for it, and they should explain to the employee that the decision is final.
6. Discuss benefits information
Clearly communicating the status of benefits upfront may help reduce the number of follow-up questions terminated employees have. Employers should discuss what will happen to the employee’s health insurance, retirement savings and paid time off (PTO) balances. They must also notify employees if they are eligible for Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage and provide any other notices required by law.
7. Contact security if needed
Everyone reacts differently to being terminated. If employers fear the employee may respond physically, they should call security or local law enforcement to escort the individual out of the building. Security personnel can also help retrieve any other company-issued property not already surrendered to IT, such as ID badges, parking passes, etc.
8. End the conversation respectfully
Former employees can affect a company’s reputation long after they’re gone. Those who harbor no ill will might continue to be a brand ambassador or even a future client. Where possible, employers should end the conversation on a positive note by thanking employees for all their contributions and wishing them luck in their next endeavor.
Wrongful termination
Federal law prohibits employers from discriminating against and firing employees based on protected characteristics, such as race, color, sex, religion, national origin, age and disability. Former employees who believe their termination was rooted in discrimination may take legal action against the organization. When responding to potential claims, employers should document disciplinary actions and performance reviews, which could help establish that an employee’s termination was job-related.
Communication after employment termination
After an employee has been terminated, it is important to communicate the news to the rest of the workforce effectively. Here are some tips:
| Communication Do’s | Communication Don’ts |
|---|---|
| Make a straightforward, short announcement about the termination. | Ignore the issue or sweep it under the rug. |
| Be transparent about the news. | Provide too many details about the termination. |
| Minimize employee concerns and fears. | Wait weeks to tell employees how the position will be filled or how workloads will be allocated. |
| Thank departing employees for their hard work. | Apologize or seem unsure about the decision. |
Successful employee terminations
Successfully firing an employee begins well in advance of the actual termination. The following preparatory steps can help ensure that if and when the time comes for termination, it’s a fair and transparent process:
1. Set clear expectations
Equitable performance standards, job descriptions and workplace codes of conduct are the framework upon which a solid talent strategy is built. Without this information, employees may make poor decisions or, worse, act unlawfully. It’s also much more difficult for employers to make a case for terminating an employee if the individual didn’t know what was expected of them.
2. Communicate and document performance issues
When performance is sub-par, managers should address the issue with the employee and document all discussions. This information can help support an employer’s denial of unemployment claims and aid in responding to unlawful termination claims. Documented instances of poor performance and policy violations should also be acknowledged by employees.
3. Coach employees
Not every employee comes to an organization with the same skills and abilities. Some need more training and resources than others to perform their job fully. Coaching can help these individuals succeed. The process may include conversations, during which managers try to demonstrate positive behaviors and reinforce performance.
4. Create performance improvement plans
Performance improvement plans typically give employees a timeline – e.g., 30 to 90 days – to complete any required training and correct unacceptable behaviors. Regular meetings with managers may be scheduled throughout the process to help keep workers on track. The plans should also explain the consequences if employees fail to comply, including whether they might be subject to termination.
5. Establish a progressive discipline policy
Progressive discipline means the severity of penalties increases each time an employee violates a company policy. Managers should enforce this system consistently and make it clear that they have the flexibility to skip the progressive steps when egregious transgressions occur, e.g., embezzlement, stealing, etc. In such cases, they may proceed straight to termination as long as they still comply with applicable laws.
Frequently asked questions about terminating employment
Is termination of employment the same as firing an employee?
Firing and termination are often used synonymously, though one is actually broader than the other. Termination of employment encompasses both involuntary and voluntary separations, such as resignations and retirements. Firing is specific to terminations initiated by the employer, which may be due to underperformance or malfeasance on the part of an employee.
How long does an employer have to pay employees after termination?
Under federal law, the final paycheck for terminated employees is generally due by the next regular payday, though many states require final pay sooner. In some cases, the time frame differs based on whether the termination is voluntary or involuntary. Many states also have rules about the location and method for final pay. Employers should check their state laws for specific details.
This article is intended to be used as a starting point in analyzing termination of employment and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
