What is termination of employment?

Termination refers to the ending of an employee’s employment with a company. Such an end of employment can happen either voluntarily or involuntarily. Voluntary termination occurs when an employee tenders their resignation, retires or reaches the end of their contract period. Involuntary termination occurs when you dismiss an employee with or without cause.

Aspects of a termination policy to consider

Once you decide to dismiss an employee, there are several things you have to consider to ensure that you abide by the law. This includes the following aspects:

Terms of employment

Employers are generally expected to follow relevant employment laws and internal procedures when outlining reasons for a dismissal. Make sure your dismissal is in line with the terms of employment with that employee. Extra care may be appropriate in situations such as:

• If the situation involves characteristics that may be protected under applicable anti-discrimination regulations. 
• If the employee has recently returned from a protected leave or had made a complaint. In such situations, employees may perceive the decision as inconsistent or unfair. 

Performance history

Many organisations aim to ensure employees are aware of performance concerns before termination discussions. It should only be a formality for something they knew was coming for a while. You should, for instance, have already warned an employee falling short of their performance expectations and given them a chance to improve, such as through a performance improvement plan.

Even when you have to dismiss someone instantly for gross misconduct, you ought to substantiate your actions with a specific policy that details the actions that cause instant termination. It can be helpful for companies to maintain written policies that align with your company’s goals. These serve as a record to fall back on if an employee claims unfair dismissal.

Before you decide, consider whether your company employee’s handbook discusses performance improvement and termination. Ensure that your decision aligns with the formal disciplinary process or internal company policies. You can use the employee’s file to show evidence of their failure to meet key performance metrics consistently. You can also base your decision on performance reviews if they had flagged the employee’s poor performance beforehand.

Related: 10 Strategies for Hiring Great Employees

Grounds for dismissal

Employment regulations may set expectations around how employers document the reasons for a dismissal. You should offer a valid reason and justify it to indicate that your decision was reasonable. This means that you may want to investigate a situation fully before rushing to fire an employee to show the fairness of your decision.

Separation agreement

Some employers use separation agreements to document the terms of an employee’s departure. Many employers consult qualified legal professionals to review these documents. You should, however, never use such agreements to stifle legitimate unfair treatment claims.

Lessons learned

It’s costly to lose employees and even costlier to hire their replacements. So, you must find solutions you can implement to improve your workforce. Workforce analytics and talent management strategies can help you allocate positions more appropriately to ensure employees are satisfied and their potential maximised.

How to write a termination letter

Some organisations provide termination letters during in-person meetings to support a clear and respectful process. This documents the meeting and ensures that you treat the termination process with the sensitivity and professionalism it deserves. This can contribute to a respectful and organised transition for departing employees.

1. Start with basic facts

Organisations often include identifying details such as the employee’s name and the official termination date. 

2. Provide a reason

Have a brief explanation that details the facts that inform your decision. The specific details will help to defuse the emotional sting of the process.

3. Explain final pay

Final pay processes vary depending on company procedures and local requirements. It’s important to explain such in the letter to ensure amicable parting with the employee.

4. Break down leave

Summarise the details of remaining leave days and how you will compensate unused hours. Your company policy can help you explain this well.

5. Explain benefits and rights

You can attach any appropriate resources that can help employees understand their rights and cancellation benefits. However, you can also summarise them to explain what will happen to things such as life and health insurance.

6. Include severance and waivers if desired

This is applicable if you have prepared a separation agreement.

7. Outline offboarding tasks

This includes the things an employee needs to do before they leave, such as yielding access to company systems, clearing out their desk and giving back company equipment.

8. Close with good wishes

Even if you cannot backtrack from the termination, it’s great to end the letter positively. Avoid making apologies. Rather, wish them the best in their future endeavours.

Related: How to Find Good Employees

Example letter of separation

Here’s an example of an involuntary termination letter because of layoff:

February 21, 2021

Dear John,

Johnson Realtors has, within the last two years faced unprecedented market hardships, because of the ongoing real estate recession. We have put several measures in place to cushion our company to survive the poor economic environment, but our sales continue to go downhill. We have therefore decided to terminate 10 positions, with your role as a sales executive included, effective March 5, 2021.

A human resource representative will call you for a meeting tomorrow to discuss your final paycheck, benefits and help to link you up with a new job.

Thank you for devoting yourself to our company for the past two years.

Sincerely,

Macy Williams

CEO, Johnson Realtors