How to Write an Employee Termination Letter?

One of the most important yet stressful tasks is terminating employees. A termination letter can make this easy. Read on to find how…

As part of being an employer being in business, terminating employees is a necessary task although it can be quite stressful to go through the transition of letting one employee go while having to fill their vacancy. It is just as important a process as hiring and onboarding. Firing/Completion of term and rehiring are not always easy. But there are professional ways to do it that can reduce the trauma for everyone involved in the process. An employee is terminated either when their service period comes to an end in case of contact-based employment, or they are leaving the current job for better prospects or they are being fired from the company. In either of these cases, it is important that the exit formalities be completed properly and that there is proper documentation for every procedure. A termination letter is just one of the exit procedures that marks the end of the employee’s journey with the organization due to the reasons mentioned above.

What is a termination letter?

If you are an employer considering terminating an employee, it is important that you have a written record of everything. A termination letter serves the same purpose. It confirms the end of an individual’s employment with the company and brings forth the important information that they need to know to be able to move forward. This serves as the official record for the layoff or firing.

The termination letter provides reasons for the involuntary turnover, lists the next steps that the employees need to take, and brings forth any compensation or benefits that they will receive. It is also known as a letter of separation, a notice of termination of employment, or a contract termination letter.

When are termination letters used?

Termination letters are usually used when informing someone that their employment with the organization is ending. They are mostly required by the company’s internal HR policy and also serves as a courtesy to the leaving employees. The following are generally the circumstances when they are issued:

  1. Without cause: Without cause refers to employment dismissals related to company downsizing and other larger market factors, unrelated to specific employee performance or fit within the company.
  2. With cause: With cause refers directly to an individual employee’s performance and behavior.
  3. End of a business contract: This letter is used to end business relations with another party you previously entered a contract with.

Why are termination letters important?

Termination letters are important as they can help you maintain a good reputation for your company, show professionalism, and provide a record of events for legal reasons, though most of the employers are not required to provide one.

Providing a letter of termination is a more compassionate and respectful way to dismiss employees. Giving employees notice allows them some time to handle external situations that will change with their unemployment. It also gives employees a full understanding of the details of their dismissal. It’s important to continue showing respect for an employee and assist them with their transition. This fosters a better relationship between the employee and the company, providing an opportunity for them to return in the future.

Elements in a termination letter:

While writing a termination letter, the following are the important points to be kept in mind and included in the letter.

1. Basic Employee information

Include the employee’s basic information, such as full name, employee ID, contact details, position title, company name, name of the person handling the termination, the date of the termination letter, and termination date if different from the date of issuing the letter.

2. Reason for termination

There are a number of reasons why you could be letting an employee go. Stating the reason for the termination will serve as a record and help the employee know why they are being laid off or fired.

3. Return of company property

If the employee has company property in their possession — like a cell phone or laptop — make a note of it and ask for its return.

4. Terms of employment

Do you have a contract with the employee? Did you make any verbal promises at the time of hiring? Make sure to consider all the facts that were stated in their offer letter as part of terms of employment.

5. Performance history

Termination should never come completely out of the blue. By the time you hand someone a termination letter, it should be a mere formality. Employees who are falling short in some way should have been informed of that and given a chance to improve, possibly through a formal performance improvement plan. Doing this not only gives employees every chance to succeed, but it also gives your company a record to fall back on in case of legal challenges.

6. Ground for dismissal

If you have a clear case for firing, write the reasons down in factual terms. Reference relevant employment policies and specific performance measures to support your decision.

7. Separation agreement

You may want to prepare a separation agreement releasing you from future legal claims in exchange for severance pay or other consideration. Consult with an attorney to ensure that your agreement is legal before offering it. These agreements are a way to ease the pain of separation, not to stifle legitimate complaints of unfair treatment.

8. Vacation and Sick time

If the employee has accrued any vacation, sick days, or PTO, including whether they will be paid out for unused time.

9. Final paycheck and severance pay

In the employee termination letter, include information about the final paycheck: when it will be issued, if it will be mailed to the address or picked up at the office. Consider including the final paycheck at the time the employee signs the termination letter, that way you can officially end employment. It is up to the company’s discretion if they will include severance pay — this is usually outlined in the employer’s handbook. The amount is usually based on how long the employee has worked for the company.

10. Off-Boarding Tasks

Just like on-boarding, mention the off-boarding tasks that need to be completed. Make sure to take the exit interviews and complete all formalities once and for all when the employee is leaving the company.

11. Include HR information

It is important to include relevant information regarding the immediate supervisor and the hiring process and the details about the Human Resource department of the organization so that the employees are aware of the various policies of the company.

12. End with good wishes

Last but not the least, end your employee termination letter with good wishes for your employee, wishing them success in all their future endeavours. Treating your employees nicely and warmly always works wonders in keeping relations good no matter what the reason of termination.

You will readily find samples all over the internet. But it works wonders to create your own and curate it according to your needs and specifications. Employees are the assets of your organization and it is in the best interest of the organization to treat them as one.

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Suchismita Panda