When it comes to ending employment, know that there is a respectful, efficient way to address the situation. Following a separation of employment checklist is a good starting point to help you follow best practices, maintain consistency, and protect your business during a challenging process. Keep in mind that employment termination can be complicated, and depending on the situation (e.g. applicable state laws, your industry, type of employee, etc.) you may want to seek advice for additional, appropriate actions.
Key first steps to involuntary terminations
Depending on the circumstances, there are some key initial steps that are essential to the employment termination process. These include documenting the process, creating a transition plan, communicating with key staff members, and notifying your IT administrator.
Document the separation of employment process
When you've made the decision that termination of an individual’s employment is necessary, you must take care to protect the company by compiling detailed documentation that shows you followed company policy through discipline and termination.
Place a record of the effective date of termination along with all other relevant information concerning the reason for the decision in the employee's file. Be sure to include supporting details, such as previous performance reviews, warnings and disciplinary actions, etc. Provide an official termination letter to the employee including the date of termination and outline of their benefits status.
Create a transition plan
Terminating an individual’s employment, even an underperforming one, leaves a vacancy in the duties they performed. However, you can anticipate this void and lessen the impact by making a plan for processes and functions that were the employee's responsibilities. Identify who can and/or will take these over once the employee is gone and how long the person or people will be responsible for the acquired duties. Consider the impact, even if temporary, that this may have on overall productivity.
Discuss the termination with key staff members
A critical component is to discuss the termination with key staff members, like HR, who have a need to know, including in some cases the grounds for termination of employment. This may help you validate that firing the employee is warranted and there is sufficient information for the termination. This conversation is necessary for your protection and the organization. Furthermore, separation of employment should be handled discretely. Keep discussions limited to other managers who have a need to know or company leadership when appropriate. Do not engage in discussions with staff members who do not have a need to know the details related to the separation.
Notify your IT administrator
Depending on the situation, notifying your IT administrator should be at the top of your list once you know for certain you are terminating an individual’s employment. Provide a specific date and time you want IT to cancel that employee's access to computer and telephone systems, disable the employee's passwords, and block access to systems and information that involves accessing computer records, telephone messages, or other devices. Take similar actions where the employee has remote access to your company's systems. When applicable, request disabling the employee's parking and building entry security code or access card.
Follow separation of employment protocol
In what is admittedly a delicate and potentially emotional situation, you don't want to find yourself improvising the steps necessary to put closure to the employee's termination. Your company's separation of employment protocol should be clearly outlined and include a logical sequence of steps that are initiated when you tell the employee their employment is terminated. Consider the following as part of your company's termination protocol:
Create a separation of employment package
When an employee is hired, it's likely you provide information to help them navigate their way in their new position. A separation of employment package serves the same purpose, but in reverse. Create a packet of paperwork, resources, and things the employee needs to know – termination letter, benefits-related paperwork, HR contact information, and possibly external resources for unemployed individuals.
Include any money owed in the final paycheck
If your company owes any money for unpaid expenses or bonuses, this amount should be included in the employee's final paycheck in accordance with applicable wage and hour laws. Terminated employees may also be entitled to payment for accrued-but-unused vacation, personal, and/or sick time. Be sure to check your state laws regarding these payments as well as when final paychecks must be issued.
If the employee is enrolled in a company-sponsored group health insurance program, they may be entitled to continued health insurance coverage in compliance with the Consolidated Omnibus Budget Reconciliation Act (COBRA) or similar state law. Ask your health insurance provider to confirm deadlines and obligations to ensure your company stays compliant with notice requirements to employees.
It's best practice to give departing employees a benefits status letter that outlines any relevant information regarding the company's life insurance and retirement plan programs, if applicable. Employers in some states are also legally obligated to provide employees with a separation notice explaining how they can claim unemployment benefits.
Ask for current contact information
In some situations, you may have to continue to interact with the employee after your last face-to-face meeting. For instance, you may need to send a Form W-2 or IRS Form 8889 to report HSA contributions for tax purposes. Before the terminated employee leaves, make sure you have updated contact information and ask to be alerted if their residence changes in the near-term. You may want to explain why you need updated contact information, so the terminated employee understands why it's beneficial to them.
Additionally, you may need to supply a separation document, depending on the state. There is also the possibility that they will ask for a reference when applying for new job opportunities.
Inform staff and customers about the employee's departure
Once you've officially terminated employment, you may want to begin informing certain staff and customers that the individual has left the company. In the event of a change, it's natural for people to feel uneasy and concerned. Reassure staff and customers that business will proceed smoothly in the transition period and let them know who will assume the employee's responsibilities and how that person can be reached.
It's in your and your company's best interest to refrain from sharing any information about the reasons behind the separation. Anticipate that you may be pressed for details and consider having a prepared reply to help prevent yourself from being pulled into an inappropriate conversation.
The process of terminating an individual’s employment
Making the decision to terminate someone is never easy. From the supervisor's perspective, it can feel like a process filled with anxiety, guilt, and discomfort. While there are technicalities associated with employee termination, it is ultimately a human process best handled with equal parts of kindness and professionalism.
Honesty is the best policy when conducting the conversation. Although uncomfortable, supervisors should be upfront in telling the employee why they are being terminated. Your reasons should align with your documentation of poor behavior and/or performance, which you can use as a reference.
Be kind and respectful
Financial anxiety, self-doubt, stress – there are many emotions that often accompany an individual's separation of employment. When you have this conversation, demonstrate respect for the employee by approaching it delicately. Show kindness and empathy regardless of how the employee may react or say.
Termination of employment is not something people typically plan for, and losing a job risks putting them in a vulnerable position both mentally and financially. It's in your organization's best interest to demonstrate that it cares for its employees, even those who are terminated, by offering materials and information on unemployment, job-searching resources, and other information or guidance that may help an employee in this situation. Remember, even though this employee is leaving the company, they carry the knowledge of their experience and may speak about the experience with others, including potential customers or future employees. Offering these resources may help safeguard the relationship's integrity.
Things to keep in mind after making the decision
The process isn't over when your conversation with the employee is complete. Even afterward there are some things to keep in mind once this discussion is over. The following steps focus on important action items that follow a separation of employment.
Reclaim company property
At the separation meeting, ask the employee to relinquish all company-issued property – laptops, tablets, cell phones, ID badges, keys, and uniforms (if applicable) – as well as any company documents in their possession. If any of these items are kept at the employee's home, schedule a time for the employee to return them.
Set a time when the ex-employee can collect personal items
Some businesses prefer this pickup to take place immediately following the separation meeting. Others prefer a weekend or after-hours time. Depending on your company's policy, consider the logistics of when the ex-employee can collect their belongings. Be sensitive to the reality that it may be a humiliating experience if the employee is forced to clean out their workspace in the middle of the workday surrounded by their colleagues. For safety and security some companies prefer to collect the employee’s personal items for them and either give or send them to the employee.
Keeping employee records
Employers must comply with all applicable recordkeeping requirements on a state, local, and federal level. It's imperative that you familiarize yourself with the requirements in the location(s) in which you do business. Several recordkeeping requirements include those from statutes enforced by the Equal Employment Opportunity Commission (EEOC), such as the Age Discrimination in Employment Act (ADEA), as well as other statutes such as the Fair Labor Standards Act (FLSA).
When it comes to recordkeeping, the following tips can help you stay organized and compliant:
- Use a secure centralized HR system to house employee records, where files can be easily separated to maintain confidentiality. Other benefits of using this type of system include the ease with which you can back up files, use cloud storage, and safekeep information away from future business disruptions (e.g., natural disasters, extreme weather events).
- There are certain types of records that cannot be combined, whether in paper or electronic format. For example, an employee's medical information cannot be saved in the same location as their general personnel files. It is a best practice for certain documents to be retained separately.
- Employers must maintain strict confidentiality of all employee files. Only people with a legitimate business purpose should have access to these files.
In the event of a lawsuit against your business, personnel files may help provide relevant documentation and evidence. Such files generally include performance evaluations, employee commendations, notifications of salary and raises, and records of any disciplinary actions taken during the employee's tenure at your company.
The true costs of employment separation
When an employee leaves, there are associated costs that can impact your business's bottom line. First, there are the direct costs related to an employee leaving, such as the time and administrative effort required to administer benefits and paying out separation benefits such as severance pay or accrued time off. Second, businesses are faced with the costs associated with having a vacant position. While you're tasked with the time and expense associated with hiring a new employee (using recruiters, placing ads, interviewing, onboarding, etc.), you may also face additional costs of hiring a contingent worker or paying other staff overtime to handle the ex-employee's responsibilities. Both of these temporary solutions can negatively affect overall productivity. The latter also risks stretching current employees too thin.
There are other indirect costs involved following an employee separation. Employees may feel alarmed when such an event occurs, which can result in decreased productivity and morale. For the business, it may be challenging to attract top talent or keep current staff members engaged.
Handling severance pay
Depending on company policy, you may offer severance pay. This is often associated with employees who are not terminated through behavior or performance issues but rather situations like mergers, acquisitions and/or changes in business needs. The employee's salary level and length of service are often used to calculate how much severance pay is provided.
It's common for an employee to accept a severance pay package on the condition that they sign an agreement that contains clauses related to litigation against the company. Laws governing contingency agreements vary from state to state, so it's important you seek legal counsel when drafting such a document.
Using software as part of the employment separation process
Employee separations are an inevitable part of owning and managing a business. Leveraging employee management software can assist businesses in critical HR areas, and may keep turnover rates to a minimum. A reputable provider can help you stay on top of state and federal laws, streamline important forms and procedures, and tackle other important issues related to termination.