One of the most difficult aspects of being an employer is terminating an employee. But, at times, it's a necessary decision for the best interests of the business. When faced with a termination, consider using a checklist, such as the one provided here, to help you manage the employee termination process.
#1: Review the decision carefully.
Make sure more than one individual is involved in the termination decision and carefully examine the facts and circumstances at-hand. Your decision must be job-related and should be supported by relevant documentation (such as discipline notices and performance reviews). Termination decisions should never be based on an employee's protected activity, such as filing a discrimination complaint or taking job-protected leave, or because an employee is a member of a protected class. If the employee's performance is the issue, consider whether you have given them a reasonable opportunity to improve. Additionally, you generally want to ensure the decision is consistent with how you handled similar situations in the past.
#2: Prepare for the meeting.
Once you have made the decision to terminate the employee, schedule a time and place for the termination meeting. Hold the meeting in private but plan to have a witness present. Think carefully about what you plan to say, be straightforward and provide support for your decision. Give the employee an opportunity to respond, but make clear that the decision is final. Employees may react with anger, disappointment, or grief, so be prepared to handle their reaction. While you may show compassion (such as thanking them for their contributions and wishing them well), avoid saying anything false or misleading in an attempt to soften the blow.
#3: Document the reason for separation.
Document the reason for termination and the effective date and keep a record in the employee's personnel file. If the employee's termination is a result of misconduct or performance issues, make sure you keep records supporting your decision (such as past performance reviews or disciplinary notices).
#4: Comply with final pay requirements.
Under federal law, final pay is due by the next regular payday, but many state laws have stricter deadlines. Additionally, depending on your state, you may be required to include accrued, unused vacation and paid time off in the employee's final pay. Check your state law to ensure compliance and keep a record of when you provided the employee with their final pay.
#5: Provide benefits information.
If the employee is enrolled in group health insurance sponsored by your company, separation may entitle the employee to health insurance continuation (or "COBRA"), which triggers certain notice requirements. Work with your health insurance provider to ensure compliance. If the employee is enrolled in a company retirement plan, you should also provide information on their options after leaving (such as cash out, roll over, or keeping the plan as-is).
#6: Furnish state-required forms and notices.
Several states require employers to provide a separation notice detailing, among other things, the reason for, and date of, the separation. In some cases, these notices are given to the employee, but some states require employers to send the notices directly to the state unemployment agency. Some states also require employers to provide written information about unemployment insurance benefits or an unemployment insurance pamphlet to employees at the time of separation. Employers may also be required to provide notices about certain other benefits. Check your state requirements to ensure compliance.
#7: Ensure return of company property.
As soon as you notify the employee of your decision, go with the employee to their workspace so you can start collecting company property. Use a Receipt of Company Property or similar form to track company-issued property that has been returned to you, such as company ID badges, cell phones, laptops, and keys. Take necessary steps to disable building codes and access to computers and confidential data.
Note: Employers are prohibited from withholding an employee's final paycheck because of unreturned property. Federal and/or state laws place restrictions on an employer's ability to make payroll deductions for unreturned property.
#8: Confirm mailing address.
Make sure you have the correct address for sending the departing employee's Form W-2 and other pertinent information in the future. Ask the employee to verify their current address and to notify you if they have a change in address.
#9: Notify key staff and contacts.
Prepare a list of the staff, key clients, and contacts that should be aware of the employee's departure. Explain who will be handling the departing employee's work responsibilities in the future and identify a contact who can address any questions they may have. Work with co-workers to identify the resources they need to handle any extra work as a result of the departure. In general, avoid disclosing the reason for the employee's departure.
#10: Prepare for unemployment claim.
In most cases, employees who experience a company-initiated termination are eligible for unemployment. However, in most states, if the employee was terminated due to "gross misconduct" (as defined by state law), they may be denied unemployment benefits. Eligibility rules vary, so check your state law for details. Once a former employee has filed a claim for unemployment benefits, you will receive written notice from the state unemployment agency.
The employee separation process must be handled with extreme care to ensure compliance with federal and state requirements and a smooth transition for the company.