Best practices for employee termination

Out of all the roles and responsibilities you have as a manager, there is not a more challenging task than letting an employee go. It’s especially difficult when you have to make lay-offs or separate from an employee who is essentially a good person, but just can’t perform. Whatever the reason, a separation must occur. Holding on to employees who constantly underperform or badly conduct themselves can negatively affect other employees, customers, and your company’s revenue. However, you must carefully plan and think through employee terminations. Failure to do so will lead to lawsuits and allegations of wrongful dismissal. They also need to be conducted in the most painless way for both parties.

In addition, you need to consider the requirements of employment legislation at the federal and state levels, particularly around your obligations post-termination, such as severance and COBRA requirements.


Here are some best practices to bear in mind when terminating employees.


Build sufficient grounds for termination

Laying the ground for termination starts from when you take on new employees. Whenever you onboard them, you need to familiarize them with disciplinary policies and performance expectations. It would be best if you also were clear on what behavior is considered acceptable and what is considered unacceptable. Subsequently, throughout their time at your company, employees who fall below expectations should be given a reasonable amount of time to correct their behavior or performance. Typically, this is done through a performance improvement plan. During this process, you can warn them that you’ll have no choice but to terminate their employment if no change or improvement is forthcoming. This is important as firing shouldn’t come as a surprise to the employee at the termination meeting.


The Meeting

Plan ahead

Before the meeting, it’s essential that you plan what you are going to say and how you’ll say it to make the meeting as less uncomfortable as possible for the employee. You also need to prepare any documentary evidence to support the termination decision. This includes times and dates of disciplinary conversations, written warnings, and documented managerial coaching and counseling. Documentary evidence serves as the best defense against any potential lawsuit. Even in cases of gross misconduct where you can theoretically terminate an employee on the spot, you need to think things through. Gross misconduct needs to be proven first before taking any action. In which case, suspension is a more viable option while you investigate and gather evidence.


Terminate early in the week

The danger of firing an employee on a Friday is that they will have a chance to get agitated about it over the weekend and be up for a fight on Monday. For this reason, it’s always better to terminate as early in the week as possible.


Keep the meeting private

Hold the termination meeting in a private area away from other staff. In terms of timing, it’s better that the meeting takes place at the end of the working day when other employees have gone home. By keeping the termination discreet and private, you’re treating the employee with dignity and respect.


Terminate in person

Avoid firing the employee by phone, email, or text. Always terminate face to face. It’s a sign of courtesy. Make sure a direct manager, familiar to the employee, carries out the termination. It communicates a level of personal care. It’s also wise to have another management team member or HR representative act as a witness at the meeting. This will protect you from any threat of retaliation by the employee and act as a backup in case anyone disputes or questions your actions.


Explain clearly the termination reason but be brief

During the meeting, make it clear to the employee that they are being terminated and concisely describe why. Ideally, termination meetings should last between 10 and 15 minutes. Avoid getting into detail. Otherwise, you’ll end up getting into an argument with the employee. If the employee gets defensive or argumentative, say that the decision is final.


Don’t get angry or emotional

Whatever the reason for the termination, it’s important that you don’t raise your voice, use strong language, or behave aggressively towards the employee. You will only escalate the situation. Always stay calm and stick to the facts. Avoid making references to personal reasons or commenting on the employee’s character.


End the meeting positively

Being terminated is bound to knock the employee’s confidence, so finish the meeting on a friendly note. Thank them for their contributions and wish them well for the future. You could also offer the departing employee outplacement resources.


Other requirements post-termination

Final pay

There is no federal law that requires employers to deliver the final pay to employees immediately. However, most states require you to pay employees their final wage quickly, often upon termination. So, it’s important that you familiarize yourself with the laws of the state(s) in which your company operates. For example, in Missouri, an employee has the right to send a written request if their employer doesn’t pay the final wage at the time of their dismissal. The employer is then obliged to respond to the request within seven days of receiving it. If the employer fails to do so, they will be liable to pay additional compensation.


PTO obligations

Generally speaking, no federal or state law requires you to pay your employees unused vacation or other paid-time-off (PTO) upon termination. Nevertheless, if you promise or contractually agree with an employee to pay accrued PTO upon separation or have written vacation policies, you must comply with applicable state law. Most states require employers to stick to their company policies and past practice. It’s generally good practice to offer your employees pay for unused PTO so that you can remain competitive and attract talent.


Severance best practices

Unless the termination is for misconduct, it’s good practice to have severance agreements with your departing employees. Severance agreements involve providing employees with benefits in exchange for their agreement to release legal claims that they may have against you or your company. But, be aware that there are certain types of claims that cannot be released or waived. One example is the right of employees aged 40 or older to file charges with the Equal Employment Opportunity Commission. In addition, you can use severance offerings to demonstrate that you value your employees at every stage of their employment, improving your employer brand. A comprehensive severance program needs to include a policy and plan, redeployment programs, outplacement programs, and health benefits continuance.


COBRA notification requirements

If you have 20 or more employees, you are required under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to offer your terminated employee the option to stay on your group health insurance plan if you have one, for at least 18 months. But, be aware that even if you have less than 20 employees, some states have COBRA-type laws, which require small businesses to provide continued health coverage after termination. In terms of communication requirements, you need to inform the employee of their right to continue coverage after the termination. You need to also notify the plan administrator (usually the insurance company) within 30 days of termination. The administrator then has 14 days to inform the employee who is entitled to COBRA coverage. If your company is also the plan administrator, you’re allowed the full 44 days to notify the employee of their right to continued coverage. You are entitled to charge the employee 102% of the premium and keep the 2% for administrative costs.


Providing unemployment benefits information

When you separate from an employee, you need to provide them with unemployment benefits information regardless of the circumstance. This includes issuing them a copy of the Department of Unemployment Assistance (DUA) pamphlet, ‘How to Apply for Unemployment Insurance Benefits (Form 0590A).’ You have up to 30 days to distribute this information to terminated employees.


Reporting terminations

You’re not required to report terminations, except when you’re terminating an employee with a child support Income Withholding for Support order/notice (IWO). In which case, you need to report the termination as soon as possible to the child support agency, court, or attorney that issued the IWO. However, laws vary at the state level, so you need to check if you have reporting obligations in the states where your company operates. For a full discussion on how to report new hires see How To Report New Hires & Terminated Employees.


Returning company property

Wherever possible, you need to ask the employee to return any property to your company straight after the termination meeting. This includes company laptops, cell phones, credit cards, and office keys. Alternatively, you can send a letter to the employee requesting the return of company property. This should include details of what, when, and how the property needs to be returned. You can start legal proceedings if the terminated employee doesn’t return company property within an agreed timeframe. Always bear federal, state, and local laws in mind when establishing company property policies. In addition, you may be able to make deductions from an employee’s final paycheck for missing property, but only in certain conditions. For example, if the deduction does not reduce the employee’s average hourly wage below the minimum hourly wage during a workweek.

Terminating an employee can be a stressful and overwhelming process with so many things to consider. But, by following these best practices, you’ll be able to minimize the likelihood of lawsuits and handle the process more effectively. In some cases, they may even enable you to part with an employee on amicable terms.


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