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Updated: April 24, 2024

Four steps for handling employee terminations the right way

Published By:

Erin Ellison

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One of the most stressful and least pleasant HR tasks in business is terminating an employee. But it’s still common, even when labor markets are tight. In 2020, 5.3 million employees were either fired or laid off, but regardless of the reason for the departure, it can be an uncomfortable conversation for both you and them.


Here are some key steps you can take to make the employee termination process as smooth as possible, to limit potential liabilities, and to make sure the departure doesn’t hurt employee morale or your company culture.

Step one: Review the termination

When you’re making the decision to terminate an employee, take time to go over the employee’s file and the circumstances leading up to the termination. Ensure that all employees are being treated fairly and equally and that none have been subjected to employment discrimination in your decision making process.


You’ll also want to understand whether you’re terminating the employee for “just cause” or not.


What is a just cause termination?

A just cause termination means the employer had a good reason for ending the employment relationship. Most employment agreements are technically “at will,” which theoretically means they can be terminated at any time for any reason, but employees who are terminated for disciplinary or performance-related reasons are entitled to fewer unemployment benefits. The process of terminating them is also more likely to be acrimonious, so it may make sense to prepare for these two situations a little differently.

For terminations with just cause

If the employee is being terminated for cause, make sure that your company’s discipline process has been followed and that all documentation is available for review — by both you and the employee. When considering termination for cause, it’s important to make sure you are in compliance with state and federal laws.


Each state has its own rules, but generally, the test for whether a termination was just cause looks something like this:

  1. Did the employee know of the company’s policy or performance standards?
  2. Was the company’s policy reasonable (or standards) reasonable?
  3. Did the company investigate and determine that the employee violated the policy?
  4. Was the investigation fair and objective?
  5. Was there substantial evidence of the employee’s violation of the policy or performance issues?
  6. Was the company’s policy applied consistently?
  7. Was the termination reasonable and proportionate to the level of the policy violation?


If you have an HR professional on your team, they can help ensure that you have met standards for discipline and help you navigate any employment contracts or agreements that may complicate layoffs. You may also want to check with a legal advisor to make sure you’re following the right process.


For terminations without cause

If the employee is being laid off due to shifting business needs, they will be eligible for unemployment benefits if they meet your state’s criteria. Make sure you’re familiar with the severance package and any outplacement assistance your company will offer.


Notification and final pay

Take the time to research your state’s department of labor website to ensure you’re meeting state requirements for separation notification and agreements. You’ll also want to make sure you are ready with their final pay. Many states require a terminated employee’s final paycheck to be delivered at or shortly after the day of termination. You’ll want to check in on any remaining accrued PTO that needs to be paid out in their final check. If you need help understanding what withholding for a final paycheck should look like, try this free final pay calculator.

Step two: Prepare for the meeting

In order to have a graceful, undramatic termination, it’s important to be prepared. Here are four things you can do to prepare for a termination.


Assemble documentation

Have the termination documentation prepared ahead of time? If you’re terminating an employee for cause, be sure to have any pertinent documentation of prior warnings or performance reviews, plus your employee handbook ready for review. Talk to their supervisor or any witnesses who may have seen the behavior that led to their firing.


If you want to make sure a for-cause termination, you might also want to review a model employee discipline process or talk to an employment law expert.


Be prepared to answer questions

The employee will probably have a lot of questions. They may want to know what will happen to their benefits, such as when coverage ends for their health insurance and how to access their 401(k) funds. Have information about COBRA available. If the employee will receive severance, be prepared with a timeline for distribution or schedule of payments. If your company is offering any outplacement services, be sure to have contact information available.


They may also have questions about their personal belongings, saying goodbye to colleagues, and exiting gracefully. Be prepared to respond to these in the moment in a direct and empathetic way. Can you have boxes ready for them to pack up their things or call a rideshare service to give them a lift home? Will you need to collect an ID badge, phone, laptop, keys, or any other company items?


Make a checklist before the meeting to make sure you don’t overlook anything.

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Step three: Tell the employee

No matter what to reason for the termination, the bad news should be delivered the same way — plainly and simply. The end of employment is going to be a blow regardless of the reason. It’s important that the termination is clearly and undramatically communicated. It doesn’t need to be long and drawn out — say what you need to say.


After you explain the situation, take the time to give the employee a chance to speak. Answer their questions but keep control of the conversation. The end of employment is always emotional, but if you remain professional, you will be better able to keep the conversation focused and to move forward amicable.


In the event of a termination that may not be amicable, you might want to include one of your managers or an employee as a witness to the meeting. If you have an HR manager, you’ll want to include them in on the lead-up and the conversation — but don’t leave it to them to handle the hatchet.


Remember that losing a job is a traumatic event in someone’s life, so being empathetic and helpful will go a long way. If this employee is someone you genuinely like, you’re also likely to feel even more emotional in the situation. Offer them a good reference or make an introduction to another company that you know is hiring for their skills.


“Letting someone go is one of the most difficult things I’ve ever had to do professionally. But I also know that losing your job is one of the worst things that can happen to a person, so I try to be kind and direct in the conversation. I avoid small talk, and when they come into my office, I cut to the chase. Generally, someone knows it’s coming, so don’t belabor the inevitable. I’m also careful to make sure I have everything they need for unemployment, insurance, severance, etc. in that meeting, and collect all company property from them that day so they don’t have to worry about coming back to the office,” explains Jena Dunham, Managing Partner & VP of Operations of Black Bear Design in Atlanta.


And look after yourself. Letting an employee go takes a toll even the most experienced managers, so do what you need to do to restore yourself and regroup. Don’t schedule another meeting right after a termination conversation.

Step four: Assure your remaining employees

Terminations are naturally disruptive, and it’s important to maintain the former employee’s right to privacy. However, it’s also important that your team returns to normal as soon as possible. Start by addressing the elephant in the room. Let your employees know what happened, but skip the details. A simple email stating that “John is no longer with the company, and we wish him well,” is fine.


Another big question your employees will likely have will be about the new division of labor. If there have been layoffs, your employees will want to know if they will have any additional work. They will be concerned that their job may be next, so reassure them if you can. And ask if they have suggestions about how to fill the void left by the terminated employee. If you have had a termination for cause, your employees will want to know if that position will be filled.


And if you’re laying off multiple people, you’ll also want to make sure employees aren’t concerned about the direction of the company. Be open, honest, and transparent with them about the circumstances surrounding a layoff up to mentioning anything specific about an employee or their performance.


Or, if your business has been impacted by a national emergency or natural disaster, be open with them about your plans and intentions for continued or ending business operations. Many business owners assume that if they are honest with their employees about difficult circumstances, it will scare them off. If the situation is big enough to warrant potential layoffs and business closures, increased uncertainty about their jobs will likely have more of a negative impact than transparency.

Managing multiple layoffs?

Please note: If you find that you will need to need to shut down your business or lay off multiple workers, it’s important to review the federal or state Worker Adjustment and Retraining Notification Act (WARN) requirements around advance notice for your business.


Employers who are typically subject to the federal WARN Act (primarily those with 100 or more full-time employees) must provide 60 days’ notice of an “employment loss” if there is a mass layoff impacting 50 or more employees over a 90-day lookback period.


There are also “mini-WARN” acts in California, Connecticut, DC, Georgia, Hawaii, Illinois, Iowa, Maine, New Hampshire, New Jersey, New York, Tennessee, Vermont, and Wisconsin.  Some states – Georgia, Maryland, North Dakota, and Ohio – require notice to state agencies but not to employees, and Michigan and Minnesota encourage, but don’t require, notice to employees prior to closings or mass layoffs.


If you aren’t sure which regulations apply to your business, consult your legal advisor.


The best way to make sure the end of employment is handled gracefully, with as little drama and as much dignity as possible, is to use professional-grade empathy. Put yourself in the shoes of the employee who will be terminated and consider the questions and feelings they may have. Terminating an employee will always be stressful, but with preparation and thoughtfulness, you can make it a little easier for everyone, and make it a smoother path forward.


This information is not to be taken as tax, legal, benefits, or HR advice. Since rules and regulations change over time and can vary by location, please consult a lawyer or HR expert for specific guidance for your business.

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Erin Ellison is the former Content Marketing Manager for OnPay. She has more than 15 years of writing experience, is a former small business owner, and has managed payroll, scheduling, and HR for more than 75 employees. She lives and works in Atlanta.