What Are the Different Types of Termination of Employment? 

There are several different ways an employer can terminate an employee’s contract. Termination of employment is often the last step in a long process; this could be for a staff member taking redundancy or an employee subject to a disciplinary procedure.

All employers should know when and how to terminate employment contracts to protect their business. Rules surround each type of termination. Failure to follow the correct process leaves the door open for an employee to claim unfair dismissal. Read on to discover the different ways to terminate employment.

Different Types of Termination of Employment

Voluntary Termination

Voluntary termination of employment is when the employee chooses to leave their role. Resignation might be for personal or professional reasons, like a better job coming along or a change at home requiring an alteration of work-life balance. Voluntary termination also includes retirement.

The employee must give the requisite period of notice to the employer as stated in their employment contract. Voluntary termination also includes the end of a fixed-term contract: both employer and employee have already agreed to this in writing. A fixed-term contract won’t require a notice period as the contract specifies an agreed end date.

Involuntary Termination

Involuntary termination (sometimes called wrongful termination) is instigated by the employer against the employee’s consent. Involuntary termination can take several different forms. The two most commonplace are redundancy and dismissal.

Dismissal

The dismissal of an employee occurs for a myriad of reasons but usually represents either a conduct issue or poor performance in the workplace. Dismissal is not the first resort option, and a process of written warnings and hearings must be followed that outline why the employee is at fault and what needs to change. 

The employment contract establishes this process, which should comply with the latest employment legislation and regulations. No change means no job, ultimately. An employer must take care when producing the letter terminating employment; otherwise, they could leave themselves open to a legal challenge from a disgruntled former employee.

Redundancy

Redundancy occurs when a company or organization alters operations or restructures the business. Broader economic conditions, recession, or even global events can prompt redundancies, but equally, they can arise for simple reasons, such as a geographical relocation of the business.

Some big players have been announcing a raft of redundancies this spring, but redundancies can affect companies of any size. The protocol for redundancy follows a set timetable. The employer must give a valid reason for the change, offer the employees a prescribed notice period, and usually make a redundancy payment, often equated to a few months’ salary.

Employment at Will

In US Labor Law, employment at will means the employer and employee maintain a working relationship for as long as it suits them. If one party isn’t happy, they can terminate the arrangement.

The employer can fire the employee anytime without giving a reason or notice period. However, the reason for termination must be legal and not based on gender, race, religion, sexuality, or disability.

If you have a problematic employee, then Employment at Will is an easy way to terminate them. Just ensure you document the reasons, as ex-employees may make life difficult for employers legally. 

Mutual Termination

Mutual termination describes a collaborative agreement between employer and employee to terminate their arrangement. There are numerous reasons for mutual termination, but a consensus can avoid a messy departure from the workplace.

What Are the Most Common Reasons for Employee Termination?

Attendance

Poor attendance is among the most common reasons for terminating an employee’s employment contract. Bad attendance could be excessive time-off beyond genuine sick leave and holiday or bad timekeeping, such as being repeatedly late for work.

Termination for poor attendance can overlap medical termination of employment if an employee has been absent due to ill health. The employer must take steps to accommodate an employee elsewhere in the business if they cannot perform their existing job due to medical reasons.

The Americans with Disabilities Act (ADA) protects workers from termination due to disability. The ADA also prohibits discrimination against employees experiencing a medical condition. Employers should be mindful of this legislation and the Family and Medical Leave Act (FMLA) when terminating employment on health grounds. 

Poor Performance

Being bad at your job isn’t enough to get fired, but being persistently warned about a poor standard of work and failing to step up certainly is. The employer must follow a protocol of written warnings and offer assistance or further training if necessary. If, after this, there’s no improvement, firing is justified.

Sharing Confidential Information 

Proprietary information is also known as ‘trade secrets.’ Some employees will have access to this data, and usually, their employment contracts feature a non-disclosure clause. If an employee breaches this contract condition, the employer is typically entitled to terminate employment. 

Final Thoughts

Termination of employment is a sensitive issue and can be hazardous for employers who don’t want to get caught with an unfair dismissal claim. Future employers should be on the lookout for prospective staff members who may have gaps in their resume or who have left a previous employer under a cloud.

Avoid a recruiting disaster for your business and use ScoutLogic’s screening services to check the background of applicants to your company.

David Garcia

David Garcia, co-founder and CEO of Scout Logic, is an industry leader in the bulk background check world. With his strategic acumen and expertise in the HR sphere, specifically in hiring, recruiting, legal compliance, background checks, and resume screening, he’s an invaluable asset and consultant.

David's counsel extends across the boards of ScoutLogic, YipitData, and Supplier.io, drawing from his impactful stints on the boards of Infutor and Avetta. With an extensive 25-year journey, he champions unparalleled B2B commercial leadership within data & analytics, significantly shaping the HR landscape.