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How to Establish a Termination Policy


A well thought out termination policy is an important part of how an organization manages its workforce. Not only does this ensure that terminations are handled in a consistent manner to avoid legal issues, but also managers have a blueprint for use.

Type of Terminations

There are two types of terminations – voluntary and involuntary. Voluntary terminations (resignations) are initiated by the employee and are relatively easy to manage. Involuntary terminations (layoffs/business closings, performance related, misconduct) are employer initiated and require forethought by both the manager and the HR department. A good termination policy addresses both types of terminations.

Legal Aspects to Consider

Government-mandated rules apply in case of layoffs. For terminations other than layoffs, following due process is key to be protected from legal issues and treat the employee fairly. Best practice is to follow a progressive discipline process when performance issues are involved. This gives the employee fair opportunity to improve performance and provides a robust documentation trail.

Some HR implications are – continuation of benefits (COBRA), Unemployment Insurance, unused vacation, company property and access to company information. Managers should work with the HR department to close the loop on these.

Manager Guidelines

  1. Remain professional: Remaining professional is crucial to avoid sharing any unnecessary information out of empathy and unwittingly provide grounds for legal action, especially discrimination claims. Similarly, things said in anger could also create legal issues. So it is best to remain calm at all times and walk away from an situation for a while if required. When unsure of how an employee might react, have someone else in the room (an HR representative or next-level supervisor).
  2. Complete all formalities before the employee leaves the building: Once they walk out of the door, ex-employees can be hard to reach. So have any paperwork organized prior to final meetings and ensure completion before the end. The same applies to company property.
  3. Involve HR from the beginning: Bringing in HR from the start of any issue can sometimes even resolve problems in a positive way through counseling and avoid termination altogether because of performance improvement.

Legal Formalities

  1. Exiting employees should sign any non-compete or confidentiality agreements prior to leaving the office premises. They should also receive a copy of this document.
  2. Any outstanding salary payments to the employee must be discussed and employee notified of last paycheck date

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