Employment Termination Letter

Employment termination letter template 

Parting ways with an employee is always challenging for any manager. And serving a termination letter or termination agreement is undoubtedly a difficult task that no one in your organization will fight you for. 

But whether it's due to cutbacks, poor performance, or misconduct, navigating the delicate process requires a balance of honesty, directness, and fairness. 

A well-worded termination letter is critical to hit these goals and safeguard your organization from legal ramifications. 

With that said, we must remind you that serving a formal communication should complement, not replace, a private meeting with the individual in question. When possible, always have someone from your human resources team present to ensure a thorough and respectful discussion about the termination.

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What is an employee termination letter?

A termination letter is a formal notice that informs an employee that their employment is ending. 

While issuing a termination letter may not be required for your business from a legislative or HR perspective, ensuring you have notified employees in writing ensures you have a permanent record of the decision and why.

The free sample employee termination letter template above can help when facing the difficult task of letting someone go. Simply fill in the data fields or use it as a guide to structure your letter and avoid misunderstandings and potential legal disputes. 

By the way, termination and layoffs are not the same thing. Both mean the end of employment, but termination is connected to an employee’s performance, while a layoff has more to do with a change in business direction.

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What to include in a termination agreement letter?

Creating the perfect termination letter requires a delicate balance — being concise and kind. 

While keeping the communication brief is essential, crucial elements must be included. 

This provides the departing employee with the necessary details about their termination and safeguards your business in case of any potential appeals, depending on the grounds for termination. 

Your termination agreement letters should always include the following:

• Termination date — Inform the employee their employment has been terminated and the date this is effective.
• Reasons for termination — Detail the reasons why you’ve terminated their employment. If termination has followed a disciplinary process, you can say "Gross misconduct," for example, and then include any relevant meeting notes or minutes with the termination letter rather than detailing everything in it. Ensure you are clear and to the point so the employee knows why their employment has been terminated.
• Details of any salary or benefits owed — Where termination is unexpected, employees usually won't receive a whole week’s or month's salary, so you should detail what they're owed and when they'll accept it. To avoid doubt, specifically describe things like severance pay, payment for unused leave, and other owed salary. If their employment included benefits like healthcare and pensions, notify them when their employer coverage will end and how they can manage their retirement in the future.
• Details of company property they must return — Outline what company property they must return and include a deadline. This can include anything from a company smartphone and laptop to a car or rental property. Detail any deductions you’ll take from their owed salary if company property is not returned.
• Reminders of signed agreements — Refer to the employee’s contract and any Non-Disclosure Agreements (NDAs) or other documents they have previously signed and remind them of their obligations within these. You may include these documents with the letter, but you don’t need to list every clause within the termination letter.
• HR contact information and the appeal process — Ensure the employee has contact details for your HR department should they have any questions about their termination or what you’ve listed in the letter. You should also detail the appeal process for dismissals for disciplinary or performance reasons, should the employee wish to pursue such an avenue.

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When do you issue a termination letter?

A company typically issues a termination letter to the employee when the employment has ended. 

These letters are commonly presented during termination meetings as formal documentation of the employee's severance. This documentation outlines the decision and serves as a tangible record of the termination process, providing clarity and transparency to both parties involved.

When you should use a letter of termination: 

• Termination without cause is when you terminate someone’s employment due to factors unrelated to their performance or conduct, such as if you make someone redundant or need to make layoffs due to business performance or restructuring.
• Termination with a cause is when you terminate someone’s employment for reasons directly related to their performance or conduct.
• End of a fixed-term contract — This is when you’ve been working with a freelance contractor, for example, and want to formalize the end of your working relationship. Even though the end of the contract is expected, it is still good practice to issue a termination letter to formalize things like the return of any property or remind an employee of their NDA obligations.
• If the terms of the firing are more mutual and amicable, consider using a Separation Agreement instead.

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Why write an employee termination letter?

Wouldn't it be easier to let someone know during the meeting that they’ve been let go from your company? Why go through the process of writing a termination agreement letter?

Think about it this way… writing a termination letter is a thoughtful and strategic approach, especially when dealing with an employee who hasn't met expectations or has faltered on a crucial project. 

Instead of resorting to the impulse of yelling, "You're fired!" in the heat of frustration, potentially within earshot of colleagues, taking a more composed and structured route proves beneficial.

Immediate verbal termination might rid you of a problematic employee but could lead to unintended complications. Even if the conversation is moved to a private setting, terminating verbally may be a knee-jerk reaction rather than a measured response.

Crafting a termination letter allows you to organize your thoughts and clearly articulate why the professional relationship is no longer viable. This process might uncover potential solutions to rectify the situation without resorting to termination. 

However, if termination is inevitable, having the individual read the letter and providing an opportunity for questions can help mitigate tension and foster a more respectful exit.

Not only is it the more professional approach, but writing a termination letter will also: 

• Enhance your company’s reputation
• Show commitment to due process
• Ensure you have a written record of events
• Ensure you show respect and compassion to employees, even if you’ve had to dismiss them for unpleasant reasons.‍

Here’s another reason to include termination letter templates in your organization’s arsenal. What would happen if the individual subjected to verbal termination falls under protected categories such as having a disability, being over a certain age, or belonging to a minority? This is when a written record proves extremely important. 

This documentation, encompassing past performance reviews and an employee termination agreement, becomes more crucial for defending the termination, even if well-founded.

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How do you politely fire an employee?

Name a task more challenging than having to fire someone. Even if you call it ‘termination’ or ‘letting go’, it’s still one of the most complex parts of being a business owner or manager. 

Whether it's a matter of a poor fit within the team or consistent underperformance, delivering the news of termination is a responsibility no one relishes.

Despite the difficulty in parting ways with an employee, the following tips provide guidance, ensuring the process unfolds smoothly for all parties involved. These insights help navigate the complexities of employee termination with respect and professionalism.

1. Encourage improvement opportunities: Foster employee growth through regular check-ins and semi-annual reviews. Consider a Performance Improvement Plan (PIP) before termination, providing a probationary period for goal attainment and behavior correction.
2. Secure HR presence in termination: Ensure fairness in termination meetings by having a human resources representative in the room. Collaborating with HR maintains impartiality, follows proper procedures, and prevents discrimination-related legal issues.
3. Conduct face-to-face termination: Deliver termination news in person or via video. Even in challenging situations, maintain a personal touch and be prepared to address post-termination questions.
4. Maintain clarity and professionalism: Keep the termination conversation clear and concise, avoiding small talk. Convey the finality of the decision with compassion, feedback, and respect.
5. Handle employee departure: Ensure the return of company property before the employee leaves. Consider security measures, deactivate system access promptly, and professionally handle goodbyes.
6. Communicate termination to the team: Schedule terminations to respect privacy and inform the team afterward. Provide necessary information without divulging specific details, ensuring a smooth transition for the team.
7. Strategize for the future: Learn from termination experiences and plan for the future. Assess the needs for the vacant position or adjustments within the team.

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Where and how to use a termination agreement letter

As we’ve mentioned, it’s always best to issue a termination agreement following a recorded meeting with the employee to be terminated so they don’t simply receive a letter out of the blue.

Keep a copy of the termination letter on file as a tangible record documenting the reasons for termination, the provided notice, and the company's adherence to legal requirements.

Use Contractbook’s free employee termination agreement template to ensure your letters include all the detail you need, follow a consistent structure and format, and remove human error from the equation to ensure they do what you need.