What is a termination letter?

A termination letter is a formal notice you use to inform an employee that their employment is ending. While you would typically use a termination letter when dismissing someone, there are other occasions when using this document may be necessary. While issuing a termination letter may not be required from a legislative or HR perspective, ensuring you have notified employees in writing ensures you have a permanent record of the decision taken and why.
‍

What should be included in a termination letter?

The ideal termination letter is succinct and to the point. At the same time, there are many things you need to include in your termination letter, both to give the employee all the detail they need about their termination and also to cover your business in the event of any appeal or tribunal, depending on the reason for termination.

Your termination letters should always include:

• Termination date. Inform the employee their employment has been terminated, and the date this is effective from.
• Reasons for termination. Detail the reasons why you have terminated their employment. If termination has followed a disciplinary process, you can simply say "Gross misconduct," for example, then include any relevant meeting notes or minutes with the termination letter, rather than detailing everything in the letter itself. Ensure you are clear and to the point, so the employee in question is in no doubt 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 receive it. To avoid doubt, specifically detail things like severance pay, payment for unused leave, and other owed salary. In addition, if their employment included benefits like healthcare and pensions, notify them when their employer cover will end and how they can manage their pension in the future.
• Details of any company property they must return. Outline what company property they must return and include a deadline. Employees might have anything from a company smartphone and laptop to a company car and rental property. Detail any deductions you will 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 also choose to include these documents with the letter if you wish, but you don’t need to list every clause within the termination letter itself.
• 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 everything you’ve listed in the letter. For dismissals for disciplinary or performance reasons, you should also detail the appeal process, should the employee wish to pursue such an avenue.
  ‍

When should I use a termination letter?

Even if you have no legal obligation to do so, it is good practice to issue a termination letter whenever someone’s employment ends.
‍

You should consider using a termination letter when employees leave your business under the following circumstances:

• Termination without cause. This 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 cause. This 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 the separation agreement instead.
  ‍

Why use a termination letter?

Using termination letters can:

• Enhance your company’s reputation
• Show professionalism and 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
  ‍

Where and how to use a termination letter

Ideally, you will issue a termination letter following a recorded meeting with the employee to be terminated, so they don’t simply receive a letter out of the blue.
‍

While each termination letter your business ever issues may include different specific details, depending on the reasons for termination, the framework of your letters should always be the same. Use Contractbook’s termination letter 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 them to.

‍