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Terminating employees has serious repercussions, so it pays for your company to have an official termination policy. Although your state may not require such a policy, there are distinct advantages to establishing rules and procedures. If you’re thinking of developing a termination policy, read on to learn what it should include and why it’s essential.
A termination policy is an official document that lays out the grounds and process for firing employees or otherwise terminating their employment. 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,” said Domenique Camacho Moran, a partner at Farrell Fritz. However, “employers can’t fire someone for unlawful reasons, including gender, religion, race, ethnicities and [in some states] political activities.”
Employers typically have high 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 another factor, you should treat the employee with respect when it’s time to let them go.
A termination policy supports respectful treatment and protects your business against the following risks:
If you’re terminating an employee for a specific infraction, you must outline how that action violated the employee’s original employment contract, which specifies what can and can’t be done within the scope of the job.
A termination policy should include the following elements:
The termination policy should distinguish the types of terminations:
Even if you can fire employees at will, it’s a good idea to give them a chance to improve performance-related issues. Your termination policy should spell out that process so employees know what to expect.
For example, issuing a verbal warning for a first offense is standard practice. If the problem persists, written notices typically ensue. The number of warnings may depend on the severity of the offense.
Your termination policy should spell out specific offboarding procedures. Lindsay Witcher, global managing director for Randstad RiseSmart, advises employers to be honest and empathetic when notifying an employee of a termination.
“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.”
When you terminate employees remotely, offboarding procedures may include cutting access to the business’s online applications, remote work tools and accounts.
Consider how you’ll support terminated employees. While you may prefer to cut ties, providing support while they find a new job can protect your business’s reputation both internally and externally.
Depending on your budget and the reason for termination, consider offering severance based on the employee’s years of service, outplacement benefits, COBRA insurance and more. Determine if the departing worker is eligible for unemployment insurance and if any of their employee benefits carry over.
You should also prepare a termination-of-benefits letter that outlines all pertinent information.
In addition to the elements mentioned above, remember the following best practices when you’re developing your termination policy:
The best PEO services can help you develop a termination policy and conduct other HR processes, including hiring.
Most U.S. states follow the at-will employment rule, but some have exceptions. For example, the public policy exception rule prevents an employer from firing a worker if the company violates state or federal rules. Additionally, the implied contract exception prohibits an employer from firing an employee if the two parties entered an implied agreement.
Voluntary termination means the employee chooses to end their employment with the business.
Mutual termination means both the employee and the employer consent to ending their working relationship — for example, in a forced resignation.
A termination is difficult for all involved parties, but it’s best to be as clear and transparent as possible. Be direct and upfront in informing them they are being terminated, and make it clear that the decision is irreversible.
Even if an HR staffer is present during the termination to ensure HR compliance, ensure you’re available to answer the outgoing employee’s questions. It’s essential to show compassion during this challenging time. It’s also a good idea to speak to the rest of the staff afterward to address their concerns and prevent resentment and rumors.
When you’re preparing a termination policy for your business, be as detailed as possible to avoid potential miscommunication or legal trouble. Writing a termination policy might feel overwhelming, but it’s a necessary part of running a business and having employees. Your policy should help guide you during the complex and emotional process of terminating employees. Make sure to include your explanation of termination, process of termination, offboarding procedures, and severance pay and support.
Sammi Caramela contributed to this article. Source interviews were conducted for a previous version of this article.