Updated August 21, 2023
An Employee Termination Letter is a form that can be used in a variety of situations in which an employee must be informed that their services are no longer required. In most instances, it is a good decision to provide this information in writing, regardless of the nature of the relationship between the employer and the employee. This form will neatly provide predetermined areas where basic information (such as the employee’s Identity) should be documented along with an area to address the employee directly regarding the reason for termination.
Employment Separation Agreement – Formal agreement detailing the terms, such as severance and the employee’s rights, after termination.
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How to Terminate an Employee (4 steps)
- Give Notice
- Which Day is Best to Fire an Employee?
- Inform the Employee of the Termination
- End Payroll and Benefits
Terminating an employee is never easy and often can lead to the employer being taxed more through unemployment insurance if the reason was not sufficient. Therefore, all firings or layoffs should be done in a civil manner with the employee being notified of the reason for their departure. Use the following instructions to terminate an employee that mutually benefits both parties involved.
1. Give Notice
How much notice depends on the employee and the situation in the workplace. If the termination is polite and cordial, the employer may want them to stay for at least two weeks in order to train someone new.
Although, if there is fear the employee could become hostile to their co-workers, the termination should be done immediately. This will best benefit all parties in order to make a short and fast transition.
2. Which Day is Best to Fire an Employee?
Again this depends on the employee. For the benefit of the employee, the firing should occur during the beginning or middle of the week. This will allow sufficient time for the individual to seek alternative employment during normal business hours.
If the employee has a history of erratic behavior, the recommended time to do it is Friday and at the end of the workday. In this approach, an employer can give the terminated employee the time to gather their things without the embarrassment of their former co-workers watching them.
3. Inform the Employee of the Termination
If the employee has access to the workplace, it is best to meet in person to handle the termination. The employer will typically request all types of access to the premises (e.g. keys, fabs, etc.) which must be handed over.
If the working relationship is on a freelance, teleworker, or remote relationship, then it’s best to use the employee termination letter (Download).
4. End Payroll and Benefits
Payroll – The employer will be responsible for ending all payments or salaries to the employee. If there is a severance, the employer’s payroll service should be notified.
Benefits – All benefits to the employee should be terminated or transferred (if applicable).
- Health Insurance – After termination, the employee will have to find short-term insurance coverage on their own.
- Retirement Benefits – Most 401(k)’s can be transferred to an IRA at a bank. Otherwise, it can be complicated and the employee should discuss it with an accountant about their options.
Employment Contracts vs. At-Will
An employee under contract may be terminated if the contract has been fulfilled. However, contracts may have specific stipulations advising that an employee may be terminated beforehand, at the discretion of the employer (business need) or due to performance issues, violating confidentiality agreements, or having behavior issues. In turn, the contract could have other specifications that ensure the employee cannot be terminated regardless. At-Will employment means that an employer can terminate the employee for any reason, at any time, and without notice. Dependent on the state the termination takes place, there are local laws that may protect the employee, even in an at-will employment situation.
Avoid Discrimination
While a contracted employee or at-will employee may be terminated at any time, it will be critical for the employer to follow state and federal labor laws. State and federal laws forbid employers from terminating the employment of an employee for discriminatory reasons (i.e., age, gender, gender identification, race, religion, national origin, the status of pregnancy, sexual orientation, disability, etc.). If an employee feels the employer has wrongfully terminated them, the employee has the right to seek legal counsel for the validity of the termination. An employer could face penalties, sanctions, or fines if found guilty of wrongful termination.