How to Write an Employee Termination Letter

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Posted by: David Garcia January 18, 2024

Terminating an employee is never an easy thing to do. You’re affecting a person’s livelihood and their families. 

However, business always comes first, which is why you need to write an effective employee termination letter to provide official documentation and notify the employee about the decision. 

In this article, we’ll provide the steps for writing an employee termination letter. That way, you have a structure to draft your own letter while ensuring you include important elements. 

What Is a Termination Letter?

A termination letter is a formal document that informs an employee that their employment with a company is ending. 

Generally, it includes:

  • The reason for termination
  • The effective date of termination
  • Details about the final paycheck
  • Information about company policies or procedures to be followed during the transition

The letter serves as an official record of the termination and helps both the employer and employee understand the terms and conditions surrounding the end of the employment relationship.

When Are Employee Termination Letters Used?

Termination letters are used when a company severs ties with an employee. It’s an important document for both parties since it serves as a legal document to make the decision official. 

Below, we’ll cover some common scenarios:

1. Voluntary Terminations

Voluntary terminations are when an employee willingly decides to end their employment with an employer. 

The decision to leave is initiated by the employee rather than the employer. Employees voluntarily terminate their employment for various reasons, such as pursuing better job opportunities, personal or family reasons, career changes, or other factors. 

While termination letters aren’t required, you should be prepared so that you can advise those employees on the next steps, such as benefits, compensation, and other considerations. 

You’ll often receive a resignation letter from the employee, which can also serve as an official document. 

2. Involuntary Termination With Cause

Involuntary termination is when an employer ends an employee’s contract for specific reasons deemed serious violations of company policies.

“Cause” typically involves actions or behaviors on the part of the employee that are considered detrimental to the employer’s interests or violate established rules.

This cause often includes reasons such as: 

  • Poor performance 
  • Failing to follow company policies 
  • Misconduct such as theft or insubordination
  • Violence or dishonesty 
  • “Excessive absence”, or tardiness 

Employers often terminate the employment relationship immediately, without providing advance notice or severance pay, since the termination results from the employee’s actions.

It’s important for employers to clearly define what constitutes “cause” in their employment contracts or policies to ensure fair and consistent application in such situations. 

3. Layoffs and Involuntary Termination Without Cause

Companies sometimes have to do what’s in the best interest of the organization. As a result, they may have to let go of employees due to cost-cutting measures or relocation of business operations. 

Depending on company policies, employees affected by layoffs may be eligible for severance packages, outplacement services, or other support.

As an employer, you also need to comply with the WARN Act Regulations. The Worker Adjustment and Retraining Notification Act is a U.S. federal law enacted to protect workers and their communities in the event of qualified layoffs or plant closures. Make sure you understand and comply with all relevant laws and regulations, including the WARN Act.

Why Is Writing an Effective Termination Letter Important?

Termination letters do two important things: they help employers keep track of termination decisions and give employees clear information to transition to their next career stage.

Good relationships with departing employees also protect the employer’s reputation since potential candidates often check reviews. 

A termination letter with dismissal details can also be important in legal situations since you’re documenting the reason for dismissal and proving that you’ve provided the ex-employees with an appropriate notification. 

But there’s more to it. 

Termination letters aren’t just about saying someone’s job is ending; they’re the final step after giving chances to improve. 

It’s one of the last papers a terminated fired employee receives,gets, explaining termination rules and what comes next. 

How Do You Write a Termination Letter?

When going through this process, ensure that you’re following your company’s policies as well as following all relevant laws and regulations. We’ve put together a step-by-step guide on how to write a termination letter. 

Step 1: Gather the Necessary Documentation 

Before writing a termination letter, gather the necessary details about the employee. The information needed depends on their time with the organization and job responsibilities. 

Gather all documentation, information, and relevant dates ahead of time before writing your termination letter. This may include: 

  • Company policy 
  • Employment contract 
  • Performance appraisals
  • Non-compete agreements 
  • Non-disclosure agreements 
  • Health insurance information 
  • Details of severance packages, if applicable 
  • COBRA continuation coverage 
  • Performance improvement plans 
  • Details of prior warnings 

The information you need may vary. Talk with your HR and legal departments to ensure you have the proper documentation. 

For contractors or freelancers, provide notice about the final day of work so they can prioritize and plan their tasks accordingly. 

Step 2: Include the Basics

You can start by covering all the key information, such as the following:

  • Employee name 
  • Date of letter 
  • Contact information 
  • Company name
  • Name of the supervisor overseeing the termination 

Keep in mind your termination letter should be empathetic, but it’s not the place to get emotional. Begin with the facts to create a clear and straightforward tone, minimizing the chance for misunderstandings.

Step 3: Provide a Specific Termination Date 

Make sure to mention the exact date when the termination takes effect. Ensure this termination date is in alignment with any relevant contractual obligations. 

Step 4: State the Reasons for the Termination 

How the termination occurred is important to include, as with cause or without cause makes a huge difference. 

Employees should know the reason for termination as it can help them improve on potential behavioral or performance issues that may have occurred during their time of employment. 

Consider if it’s a layoff for financial reasons, a decision due to the employee’s performance, or rule violations. If it’s for cause, write down any past actions or discipline. This written record can protect you if the employee sues for unfair dismissal later on.

If the employee is let go due to misconduct, you may also want to include details or records from the HR investigation; one of HR’s functions is managing employee records.

Step 5: Explain Benefits and Compensation Moving Forward 

Even if an employee is being let go for a valid reason, they still have some benefits coming their way, and you should explain these in the termination letter.

Companies might provide a severance package along with the termination notice, and sometimes, it’s tied to a confidentiality agreement (NDA). 

If the employee has accrued paid time off (PTO) or sick leave that can be paid out, mention it so that the employees can take advantage of that. 

For health insurance, if your company has plans like COBRA that extend coverage, include those details. Also, explain how to access other benefits like retirement savings or supplemental unemployment benefits if they’ve been provided.

Step 6: Request Them to Return Any Company Property 

During employment, there’s a good chance you’ll provide team members with company property. 

This property may include things like laptops, keys, phones, ID cards, or even a vehicle. Request those items back so employees remember to return them before departure. 

Step 7: Detail Disclaimers and Next Steps 

Depending on how the termination happens, you might need to guide what comes next. 

If it’s an immediate, involuntary termination, security might be there to help escort the employee out.

For terminations that don’t take effect immediately, you can give a schedule to pass on duties, help employees finish tasks, and leave without causing too much disruption.

Check with human resources for any policies on timelines for outgoing employees to ensure you follow the right procedures when creating this part.

Let the employee know that certain binding agreements, like non-disclosure and non-compete clauses, still apply even after they leave. Remind them of these agreements and give them a copy for their records.

Step 8: Consult With a Lawyer

Before you send off the letter to anyone else, run it by a qualified lawyer. Employment laws can be complex, and they vary by jurisdiction. A lawyer can ensure that your termination letter complies with relevant local, state, and federal laws, reducing the risk of legal issues. Your company is responsible for complying with all legal requirements and labor laws, but these might vary based on the reason for termination and local laws. 

On top of that, a lawyer can look it over to ensure there isn’t any language in there that could be misconstrued or lead to legal challenges. 

Ensure that you keep copies of this letter for the future in compliance with your state and local legal and HR requirements. 

Frequently Asked Questions

What Tone Should I Use for an Employee Termination Letter?

When writing an employee termination letter, you should always maintain a respectful and professional tone, even if it ends in negative terms. Remember that the termination affects the employee’s income and health coverage, so it’s good to show compassion and empathy when appropriate. 

Final Thoughts

There’s a lot of paperwork and emotion behind letting employees go, but handling it with care and professionalism can go a long way in making the process smoother. 

That said, on the hiring front, you might need help with background checks since that will reduce the chance of bad hires.

ScoutLogic offers comprehensive background checks with a wide range of search types, including criminal searchesdrug testingeducation verificationemployment verification, and more. 

Reach out to ScoutLogic today and enjoy peace of mind knowing you’re choosing the right candidate to bring on board your company.

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