Letting someone go is never easy, regardless of the size of your company, team, or industry you activate in. But as an employer, it’s something you need to do, sometimes more often than you would like to.
To go through a fair and painless termination process, your organization should have clear procedures in place regarding this issue, and everyone should make sure they are followed. The first thing that comes to mind about procedures is the existence of a termination letter(or more than one template) that must be sent to the employee you are terminating. You must ensure you issue a clear termination letter with no ambiguous language. Otherwise, you risk many legal issues, plus a negative impact on the company, such as bad morale, low productivity, and lower retention levels.
Knowing this topic's sensitivity, we have put together all the information you need to sail through these types of situations in this article. We will clarify what termination means, how to handle it with termination letters, what a termination letter should contain, and some examples of templates.
CONTENTS:
It may seem a basic term, but we want to ensure you know exactly what it means.
Employee termination refers to the situation when an employee’s work and employment contract comes to an end.
Voluntary:
when the employee leaves your organization based on their own will or has reached retirement age.
In this case, the employee must hand the employer a resignation letter and provide a notice period.
OR
Involuntary:
when you, as an employer, terminate his contract due to several reasons. We include the discharge with cause(due to poor performance, misconduct, or other violations). On the other hand, there is the discharge without cause when you, as an employer, are terminating the contract, usually due to economic circumstances-lay-offs imposed by external factors.
There is a third option, a different case of ending an employment contract, which also falls into the involuntary type:
End of (business) contract:
when an employer that hires a short-term employee/consultant/partner decides not to renew the employment contract beyond the initial duration.
These are the cases where the employer has an obligation to provide the employee with a suitable termination letter.
Termination letters are also known as a pink slip, contract termination letter, letter of separation, or notice of termination of employment.
They are a form of written document that notifies an employee they have been terminated and explains the next steps they need to take.
The reasons for ending an employment contract can be various, ranging from incompetence, misconduct, poor performance, layoffs, or any other justifiable basis.
We have another great tip for you! A termination checklist, so you don’t skip any step in this process.
As mentioned above, there are three types of involuntary termination; therefore, the letter you send the employee should reflect the types of termination individually.
Terminating a contract without a cause is usually called a layoff and is generated by economic circumstances outside the employer’s control. One of the most common reasons for letting people go is downsizing. If you're drafting a termination letter for this reason, explain why you're downsizing and how their position will be affected.
We face this type of termination when there is poor performance, misconduct, or bad behavior.
Regarding an underperforming employee, you need to ensure that before terminating him, you follow the internally established steps for helping him improve, such as offering a mentor/coach, meetings for feedback, or refreshment training.
If misconduct is the cause for termination, we speak about behavior that is against the internal regulations, the code of ethics or even breaking the law, such as stealing something from the company or fraud.
This is more of a formality since such a contract has an established natural end, so both parties know the relationship will end.
These situations include contracts with temporary employees, consultants, partners, or freelancers.
We want to point out a few crucial points for which you should not skip sending a termination letter to a departing employee:
There are no strict rules for writing a termination letter, as long as the essential information is included, but we have compiled some tips on best practices for creating such a document:
Use the right toneIt’s important to be professional and respectful. Do not use sarcastic language or mean words. Remember that even though that employee leaves the company, they depend on that income, so termination is an unpleasant moment.
You should avoid phrases such as:
Before writing the letter, collect all the data you need so the document is comprehensive.
Regardless of the reason for termination, every such letter should include the following aspects:
The reason for termination is obviously the most important segment of the document, so make sure you are honest and clear and do not use ambiguous words.
You should clarify that your decision is final, even though you mention that discussions for explanation can take place if the employee wants this.
Provide guidance for the onboarding process and offer the details for a contact personDescribe the offboarding process clearly, and ensure the terminated employee knows what steps should be taken moving forward.
Plus, assign a person from HR to be the contact in case more information is needed and for the exit interview. For more tips on exit interviews, check out our article on this topic.
Extra tip! When deciding to terminate a contract, do not base it on a comparison between that employee and others. Use your business’s standards, targets, and behavioral expectations (as laid out in your employee handbook) as the reference point.
Theory is great, but we also need some practice. Let’s see 2 templates you can use when needed. We will focus on one for termination with cause and the other without cause.
[Date]
Dear Mr.[Name of the employee]
This document is to notify you that your employment with [Your Company Name] will end as of [Last day of work]. This decision is definitive and cannot be changed.
The following are the grounds for why you were let go.:
Current economic conditions have caused a significant decline in sales, generating a 20 percent workforce reduction at our company. Unfortunately, your position, as many in your department, is included in this reduction and has been eliminated.
Note that you will receive your final paycheck after your last day and payment for your remaining leave.
Your health insurance coverage will remain in force 2 months after your termination becomes effective.
We will be needing you to return the company vehicle, key card, laptop, and cell phone on your last day of employment.
You have signed a variety of agreements that forbid you from revealing confidential information, so just be mindful of that. Please take a look at the copies attached.
Contact [HR contact person] if you have any queries about this letter or the terms of your termination.
Sincerely,
[Name of manager]
[Date]
Dear Mr.[Name of the employee]
This letter is to let you know that as of [Last day of work], your employment with [Company name] will come to an end. This decision is not reversible.
Your employment was terminated for the following performance reasons:
On May 7, 202X, you were in performance coaching (meetings and mentoring) and were told that if the employment relationship with us was to continue, your performance would need to improve. You were given a second warning on April 30, 202X, and told that if your performance didn't improve in the following 60 days, your contract will be terminated.
Unfortunately, you have failed to meet the performance targets agreed upon with your supervisor. Your employment has been terminated as a consequence.
Your last check for this month will arrive in the mail in seven days.
Your medical benefits will continue to apply for 30 days.
Before the end of the day, we will require you to return the company vehicle, the key card, the notebook, and the smartphone.
Please contact [HR contact person] if you have any queries regarding pay, benefits, corporate property, or policies you have accepted.
Sincerely,
[Name of manager]
Dear Michael Smith,
Subject: Termination of Employment
I regret to inform you that your employment as a Sales Associate at Retail Company will be terminated, effective March 28, 202X, due to excessive tardiness.
In accordance with company policy, employees should not exceed 7 days of tardiness in a month, with tardiness defined as arriving 16 minutes past the scheduled start time. The company follows a progressive disciplinary process for tardiness, with verbal and written warnings, as well as suspensions without pay, issued for repeated offenses. Termination is the final step in this process.
Despite the efforts to accommodate your scheduling needs and address your concerns, your attendance has not improved. After careful consideration and consultation with the management team, it has been determined that termination is the appropriate course of action.
Please ensure that you surrender your company ID, store key, and company-issued uniform by March 28, 202X. Furthermore, your company time and attendance platform access will be revoked on the same date. Please also be reminded of the confidentiality agreement you signed with us, and refer to the attached document for your reference.
If you have any questions or require further clarification, please feel free to contact Shelly Harper at shellyharper@company.com.
We appreciate the contributions you made during your time at CompanyName and wish you the best in your future endeavors.
Regards,
Jack Foster
Head of Human Resources
CompanyName
Dear [Employee Name],
Subject: Termination of Contract
I hope this letter finds you well. I am writing to inform you that, regretfully, we have decided to terminate our contract with you, effective [termination date]. This decision was made after carefully considering several factors, including our current business needs and objectives.
While your work has been satisfactory, recent changes in our business strategy have caused us to adjust our current employment relationships. More specifically the project you were engaged has finished. Consequently, we must bring our collaboration to a close.
We appreciate the services you have provided during the term of our agreement and the professionalism you have demonstrated. Per the terms outlined in our contract, we will fulfill any outstanding payment obligations for services rendered until the termination date. Please expect to receive your final payment within [specific timeframe, as per contract terms or local regulations].
We would like to take this opportunity to express our gratitude for your contributions and wish you success in your future endeavors. Should any opportunities arise in which your expertise aligns with our needs, we will not hesitate to reach out.
If you have any questions or require further clarification, please contact [point of contact name] at [contact information].
Thank you once again for your collaboration.
Sincerely,
[Your Name]
[Your Title]
[Company Name]
Bottom line
There are many reasons an employment relationship ends. As we mentioned, the employee can leave for a better opportunity or be let go for many reasons.
The important thing is that both parties are aware of the reason, and the employer is responsible for writing the correct termination letter.
Remember, these templates are only a starting point, and it's crucial to tailor them to your specific situation and consult with legal professionals to ensure compliance with local laws and regulations.
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