Employee Termination Letter Guide: Importance, Best Practices & Free Templates
byIn this article, we address the sensitive matter of employee terminations, emphasizing the importance of an employee termination letter. Learn about its significance from a legal, documentation, and clarity perspective, and discover free templates to help navigate this complex process.
Table of contents:
- Key takeaways
- Why you should use an employee termination letter
- How to write an employee termination letter
- Best practices for employee terminations
- The psychological impact of termination letters and how to soften the blow
- Employee termination sample letters
- Importance of collaboration with HR and legal department
- Conclusion
- FAQs
Key takeaways:
- Employee termination letters are crucial for clear communication during the end of employment.
- These letters have legal significance, provide necessary documentation, and can aid in company reputation management.
- Templates are a helpful tool to ensure consistency and legal compliance.
- Combining emotional intelligence with the technicalities of the termination process can create a smoother experience for all parties involved.
Letting go of an employee, whether due to layoffs or being fired, is not easy. Who wants to be the bearer of bad news? In that challenging moment, having an employee termination letter prepared can be a useful tool.
These kinds of letters are important from both a legal standpoint as well as to make a difficult time a bit less confusing. Let’s take a look at how to write an employee termination letter that fits your situation.
Why you should use an employee termination letter
An employee termination letter is an official notice from employer to employee that cancels employment agreements. There are a few very good reasons to use termination letters:
- Legal or policy requirements. In some states, you are required to use a letter of termination and could be held liable for costs if you don’t inform employees of an end to employment and benefits. Even in states that don’t require them, many employers use them anyway because of their own internal policies. Check with your state’s labor laws to be sure you are in compliance.
- Documentation. An employee termination letter gives you documentation. This may be useful down the road for various reasons, including a reference request or to be sure you are meeting any possible state requirements or to reduce liability.
- Justification and clarification. It lets an employee know the reason for termination. When an employee is terminated, it’s a difficult time for everyone involved (including other employees), and the letter is a good way to provide an explanation that can quell rumors or hard feelings.
- Unemployment concerns. It provides additional information the employee will need following termination (e.g. access to employer-provided health insurance, severance pay, or off-boarding procedures). Employees should know their rights and responsibilities upon termination. A termination letter also provides official notification of unemployment which the employee may need as proof when applying for unemployment or for student loan issues.
- Bad reputation. Today, 70% of employees will read online reviews of companies before deciding on a career move. Termination or layoffs done right can make a difference for your company’s reputation, and they’re the right thing to do.
How to write an employee termination letter
First and foremost, an employee termination letter, no matter the circumstances, should be written in a professional tone.
Every letter should have the following characteristics:
- Facts only. Leave any negativity out of it!
- Careful and detailed documentation. Don’t hesitate to succinctly document what has led to the employee’s termination. Legal reasons for dismissal include damage or theft of property, drug or alcohol abuse, misconduct or insubordination, poor performance, misuse of time off or sick leave, and violating company policy. Verify the facts behind the termination by reviewing internal reviews, manager reports, etc. before writing the letter. Be consistent in applying your disciplinary policy. Put nothing in the letter you would not be willing to discuss in person knowing it could be backed up.
- Do not mention protected status. Avoid mentioning health, age, sex, pregnancy, disability et al. in your letter, even casually. These could be construed as (illegal) reasons a person had employment terminated.
- Envision a large audience. The letter you’re writing to the employee may be read by other employees, lawyers, family, and managers. Keep that in mind when writing.
- Date of termination. Be specific about the date when employment will be terminated.
How far in advance a letter should be given to an employee varies depending upon the labor laws in your state, any union requirements that may be involved, or if there is a contract involved. There is no federal law, other than the WARN Act, that deals with timing.
When writing your letter, use the following termination letter template on your official letterhead:
- Header information: Start with “Letter of Termination” centered at the top, followed by the date of the letter and name/address of the employee.
- Statement of termination: The opening paragraph should be concise, stating what is happening and when it is effective.
- Reasons for termination: The next paragraph(s) should succinctly state the reasons for termination.
- Employee options: The next paragraph should provide them with a contact point (if applicable) for them to discuss the letter, as well as information about termination of benefits, severance pay, off-boarding, etc. This is the roadmap of what the employee needs to know to complete the termination.
Letter examples in this post will vary based on if they are in regarding termination, layoff, furlough, temporary layoff, or even warning employees of possible layoffs.
Best practices for employee terminations
- Clear communication: Ensure all reasons for termination are valid, well-documented, and communicated clearly.
- Emotional intelligence: Recognize the emotional aspect of terminations. Always be respectful and empathetic.
- Consistency: Use standardized templates to ensure fairness and prevent potential accusations.
The psychological impact of termination letters and how to soften the blow
Termination letters, while necessary, can have a profound psychological impact on employees. Understanding this aspect can help employers approach the process with more empathy. Here are some steps to consider:
- Preparation: Before handing out the letter, ensure there’s a face-to-face discussion.
- Provide resources: Offer access to counseling or job placement services.
- Feedback loop: Allow the employee to share their feelings and concerns about the termination process.
Employee termination sample letters
A few sample termination letter options are provided below for several scenarios. You will want to customize for your company, situation, and state laws.
Start each letter with an appropriate salutation, and end with appropriate sign-off and signature.
Please note that not every part of a template may apply to your scenario, and you should adjust accordingly based on your own policies.
If the letter is provided after a termination meeting and company property (e.g. keys, laptop) was turned in, note what was returned so there is documentation for both you and the employee.
Basic employee termination letter (no reason)
We regret to inform you that your employment with [company name] will end effective [date].
Payment for your [list of what they’ll receive] will be added to your final paycheck.
In regards to your health care benefits, they will [details].
Please return the following company property: [list].
You have signed [agreements] when you were initially employed. Please keep those agreements in mind.
If you have questions about your termination, please contact [contact person].
Basic employee termination letter (with common reasons)
We regret to inform you that your employment with [company name] will end effective [date].
You have been terminated for the following reason(s):
Poor performance—After discussion with your manager and upon review of your performance reviews, it has been determined that your work does not meet company standards and expectations.
False information—It is a violation of company policy to present false or inaccurate information during the hiring process. Upon discovery of this, termination became necessary.
Tardiness—In keeping with company policy, late arrival to work exceeding [company policy number] is reason for termination. We have documented that you have been late to work [number] times this year.
Employee misconduct—After internal investigation and review, we have concluded that your conduct towards other employees has been in violation of company policy. Our findings include [list of basic details of misconduct]
Payment for your [list of what they’ll receive] will be added to your final paycheck. You will receive a letter detailing these benefits.
In regards to your health care benefits, they will [details].
Please return the following company property: [list].
You have signed [agreements] when you were initially employed. Please keep those agreements in mind.
If you have questions about your termination or what is listed in this letter, please contact [contact person].
COVID-19 employee layoff letter
It is with great regret that I must inform you that due to the COVID-19 pandemic, we must temporarily reduce our workforce. You will be laid off effective [date]. In regards to possible return dates, we will communicate with you as we learn more.
You will receive the following layoff benefits: [list benefits]
If you have questions about the layoff, please contact [contact person]. We sincerely want to thank you for what you have contributed to the company.
Furloughed employee letter
We regret to inform you that your position is being eliminated temporarily due to [insert reason]. Your last day of work will be [date]. Your salary and benefits will continue at [current or reduced level] during this period. We want to be clear that this in no way reflects any dissatisfaction with your job performance.
The length of this furlough is not known at this time [or amount of time]. We will keep you updated with information, as our goal is to have all employees come back to work as quickly as possible.
[Insert information here on filing for unemployment if your state allows for it for furloughed employees.]
Please feel free to contact [contact person] with questions or concerns.
Importance of collaboration with HR and legal department
If you have an HR and/or legal department, work with them to develop a standard employee termination letter template for each scenario so that you are consistent with each employee and don’t open yourself up to any accusations down the road. Be sure your letter complies with your state’s labor laws.
And, most importantly, be mindful and respectful of the employee.
Whatever the scenario, this is going to be a difficult time. Do nothing to promote anger, hurt, or confusion. Communicate and be professional, giving the employee every courtesy as their employment comes to an end.
Conclusion
Employee terminations are challenging, so it’s vital to communicate with clarity, consistency, and compassion. Employee termination letters not only fulfill legal obligations and documentation needs, but also provide a structured way to convey the decision to the affected employee. By being transparent and professional, you can avoid misunderstandings and potential disputes for a smoother transition for all.
Employee termination letter FAQs
What is the main purpose of an employee termination letter?
It serves as an official notice, providing clarity and any reasons for the decision.
Is it legally required to give a termination letter?
Laws vary by state. While some states mandate it, others don’t. It’s advisable to consult with state labor laws to ensure compliance.
How should a company handle employee property after termination?
Companies typically list the property to be returned in the termination letter, ensuring a record of items returned post-termination.
*Please note: The information provided on this website does not, and is not intended to constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.
