Terminating employees has serious repercussions, so it pays for your company to have an official termination policy. Although your state may not require it, establishing rules and procedures has many advantages. If you’re considering developing a termination policy, read on to learn what it should include and why it’s important.
A termination policy is an official document that lays out the grounds and process for firing employees. Most states don’t require employers to have a termination policy, but it’s still a good idea to develop one, no matter how many employees you have.
“Almost across the country, employment is at will, which means employees and employers can terminate relationships anytime with or without notice,” Domenique Camacho Moran, a partner at Farrell Fritz, told Business News Daily. However, “employers can’t fire someone for unlawful reasons, including gender, religion, race, ethnicities and [in some states] political activities.”
A termination policy states the grounds and process for terminating employees.
Employers always have great hopes for their new hires, but sometimes, it doesn’t work out. Whether you’re terminating an employee because of a performance issue, a downturn in your business or some other factor, you should treat the employee with respect when it is time for a separation. Having a termination policy helps you do that and gives you protection against these two risks:
Having a termination policy reduces your risk of wrongful-termination lawsuits and prevents reduced morale.
A termination policy should include the following elements:
The termination policy should explain the differences between the types of terminations. Voluntary termination occurs when the employee chooses to leave. A firing occurs when the employer terminates the employee. Involuntary termination happens when people lose their jobs because of downsizing, facility closings or the shuttering or selling of a business.
Even if you can fire employees at will, it’s a good idea to give them a chance to improve if it’s a performance-related issue. Your termination policy should spell out that process so that employees know what to expect.
For example, it’s standard practice to issue a verbal warning for the first offense and, if the problem persists, to follow with written notices. It could be one, two or three written warnings, depending on the offense.
Though it’s never easy to terminate an employee, it is especially difficult during the pandemic; some companies have had to fire employees via video conference instead of having those discussions in person. Regardless of how you notify the employee, make sure to be honest and empathetic, said Lindsay Witcher, vice president of practice strategy at Randstad RiseSmart.
“It’s tempting to want to do group setting [terminations], inviting all the impacted employees to a Zoom [call] and playing a video or reading a message. But it’s not the most empathetic way,” Witcher said. “The positives from doing it one-on-one far outweigh the risk of rumors starting to spread. As far as the message itself, be transparent, detailed and as clear as possible.”
Consider how you’ll support terminated employees. You may just want to cut ties, but to protect your reputation internally and externally, it’s a good idea to provide some support, particularly during the COVID-19 pandemic, when finding a new job may be tough.
Depending on your budget and reason for termination, you can offer severance based on the employee’s years of service, outplacement benefits, COBRA or all of the above. You should prepare a termination-of-benefits letter that outlines all of the key information.
In addition to including the elements mentioned above, keep these points in mind when developing your termination policy:
All termination policies should include descriptions of the termination types, the steps in the termination process, offboarding procedures and information about severance support, if applicable.
[Looking for help with your termination and other HR processes? Read about the best PEOs.]
Every U.S. state follows the at-will employment rule, but some states have exceptions. For example, the public policy exception rule prevents an employer from firing a worker if the company runs afoul of state or federal rules, and the implied contract exception prohibits an employer from firing an employee if the two parties entered an implied agreement.
No, quitting doesn’t count as termination because it refers to the employee’s decision to leave the company. By contrast, a termination occurs when the employer lets go of the employee.
Voluntary termination means the employee chooses to end their employment with the business.
A termination is difficult for all parties involved, but it’s best to be as clear and transparent as possible. Be direct and upfront in informing them they are being terminated, and then explain why.
Even if you have an HR staffer present during the termination, make sure you are available to answer any questions the employee may have. It’s important to show compassion during this tough time. It’s a good idea to speak to the rest of the staff afterward to address their concerns, before resentment or rumors start to fester.