Terminate an Employee Legally

Managing an Employee Termination with Legal and Graceful Methods

Although not pleasant, firing a poor-performing employee is inevitable. Learn how to terminate an employee by law and with respect.

Stefana Zaric
Written by Stefana Zaric
December 6, 2022
Contents
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Firing an employee is never easy. Most HR professionals agree that it’s the worst part of the job. But terminations are a natural part of the employment process, and eventually you’ll find yourself in a situation where it’s time to sever the employment relationship.

Terminations are unique and often difficult situations that require care and respect. To gracefully handle the termination process from start to finish, preparation is key.

Key takeaways

  • There are many reasons for termination, including poor performance, misconduct, policy violation, or downsizing
  • Follow a fair and consistent process to justify a termination and hold a respectful termination meeting
  • Be aware of local laws that can affect how to approach a termination

Types of terminations

There are many reasons why an employee may need to be terminated. You should tailor your approach accordingly, since dealing with employee misconduct requires a different stance than a company downsizing.

Poor performance: The employee did not meet the expectations or requirements of their job. This could include failing to meet deadlines, not producing high-quality work, or not meeting sales or productivity targets.

Misconduct: The employee conducted unethical or inappropriate behavior, such as theft, harassment, or discrimination.

Violation of company policies: The employee did not follow rules or guidelines. This could include failing to follow safety procedures, not following dress code policies, or engaging in activities that were not allowed by the company.

Downsizing or restructuring: Company management decided to reduce the number of workers or change how the company is organized. This could be to reduce spending, leave a market, or shift priorities.

Note that there may be specific legal definitions for these terms depending on the employment regulations in your country, which might affect the actions you can take.

How to prepare to terminate an employee for performance reasons

If you are considering terminating an employee for performance reasons, it's important to be prepared and to follow a fair and consistent process. 

Bring up your concerns with the employee early

Work in good faith to address performance concerns as soon as possible. Give the employee an opportunity to address any issues and improve their performance before it becomes a more serious problem. Be specific about what you have observed and how their performance is falling short of expectations. It may be helpful to provide examples and to offer guidance or support on how the employee can improve.

Ask about blockers in and outside of work

Ask the employee if there are any factors that are blocking them from meeting the expectations of their job, both in and outside of work. This could include personal challenges, such as family responsibilities or health issues, or challenges related to their work environment, such as a lack of resources or support.

It’s equally important to clarify expectations as it is to understand why those expectations haven’t been met. Once both parties arrive on the same page about expectations, you can work to find a suitable solution.

For instance, if lateness is the issue, clarify that your office expects punctuality. But saying “don’t be late,” isn’t enough: ask the employee why they run late and what the office can do to find a solution. It might help to adjust the employee’s schedule or subsidize a public transit pass to help them get to work on time.

Document performance issues

A written record provides an objective view of the employee’s performance in their tenure and can be used to defend your termination decision if necessary.

Document any conversations or meetings you have with the employee about their performance, including any feedback or coaching provided.

There are some best practices to follow when documenting performance:

  • Define measurable and realistic expectations
  • Standardize all performance issue records for each employee
  • Use specific and objective language to describe the employee's performance issues
  • Provide examples of the employee's behavior or work that has been unsatisfactory
  • Allow the employee to review and acknowledge performance discussions, if suitable
  • Keep your documentation organized and easily accessible
  • Follow any relevant laws or company policies regarding documentation

Develop a performance improvement plan (PiP) to address the issue

A performance improvement plan (PiP) is a proactive action plan co-developed by management and an employee to address performance issues and help an employee improve their work. PiPs are suitable if you believe that the employee's performance issues can be addressed through additional support and guidance.

It's important to be open and transparent with the employee about the process and involve them in developing the PiP. Your HR department can provide guidance on how to develop a performance improvement plan that fits your company’s goals and policies, but the overall objective is to identify resources that can help the employee succeed and improve:

  1. Identify specific performance issues: Review work, collect feedback from supervisors or colleagues, or discuss issues with the employee directly to identify specific examples of the behavior or work that has been unsatisfactory
  2. Identify skill or training gaps: Determine whether the employee may have any skill or training gaps that contributed to the issues
  3. Set clear goals: Set specific and measurable goals for how the employee can improve their performance, taking into account any skill or training gaps
  4. Outline a plan: Determine how to provide additional training. Involve the employee in the development of the plan and ensure that it’s realistic and achievable
  5. Review and evaluate progress: A PiP should last long enough to give the employee a reasonable opportunity to improve. Set specific benchmarks and deadlines for progress and provide feedback and support to help them achieve the goals of the PiP. It's important to be objective and fair when evaluating progress. If the employee has not made sufficient progress, it may be necessary to make adjustments to the plan or to consider other options such as additional training or termination.

Relevant: Learn how to fire an independent contractor.

How to prepare to terminate an employee for misconduct or policy violation reasons

Termination for misconduct or violation of company policy requires clear and thorough documentation. This evidence can include witness statements, video or audio recordings, emails, or other relevant documentation. 

Review the company's policies and procedures to ensure that the termination follows procedure. Consult with HR professionals or legal counsel to ensure that all relevant laws and regulations are followed during the process. You may need to consider the potential impact of the termination on the employee's career, as well as any potential legal implications that may arise.

How to prepare to terminate an employee for downsizing or restructuring reasons

Letting employees go for non-performance reasons can be especially difficult. To prepare, create a clear policy that outlines the criteria for downsizing and the process to follow. This ensures that decisions are made fairly and in the best interests of the company. You may be required to notify workers in advance of a pending layoff.

In these situations, it's important to be transparent and honest about the reasons for the termination. The way you present the news can have a major impact on the employee and the overall perception of the company. Consider offering outplacement support or a severance package to help them transition to a new job.

Understand your location's applicable termination laws

It's important to follow the laws of the country in which you are firing employees. Otherwise, you may face legal consequences for wrongful termination. These employment laws may be different from those in your home country, so working with a local expert is important.

At-will employment is not the norm

In the United States, most employment is at-will. That means employers typically can terminate an employee without providing cause or notice in advance. However, this is not common elsewhere in the world. In Canada for example, you must either provide advance notice or additional pay in lieu of the notice. The required notice period generally increases the longer the employee has worked at the company.

Protected characteristics cannot be used for terminations

Protected characteristics are specific characteristics or traits that are protected by law. Employers are not allowed to terminate an employee based on any of these protected characteristics. Some examples of protected characteristics include race, religion, age, gender, sexual orientation, and disability.

In the US, workers also cannot be fired for reporting a workplace violation or refusing to take a lie detector test.

Termination laws for international employees

For example, in Brazil, employment law is part of the constitution and workers are often familiar with their entitlements and protections. In the EU, employers and employees are typically required to notify each other in advance and establish a notice period before terminating an employment relationship.

Failure to follow local laws can result in penalties and harm your company's reputation. To avoid these issues, it's important to be familiar with local employment laws and to follow them carefully.

An international EOR can provide valuable support and guidance in understanding international termination laws. For example, Deel has in-house employment experts with local knowledge of the legal requirements for notifying an employee of termination. They can help employers navigate cultural considerations and communicate in a respectful and professional manner.

Layoffs should be a last resort. They are expensive for businesses (especially given the cost of hiring a new employee) and can be emotionally and financially catastrophic for the terminated worker. Before you consider firing an employee for performance-related concerns, first work with them in good faith to improve the relationship.

Setting and holding the termination meeting

The proper way to conduct a termination meeting is in person if possible, or face-to-face for remote teams.

    1. Prepare documentation: Collect supporting records and prepare a notice of termination. The termination letter should include the employee’s last day, an explanation of any additional continued benefits or severance pay, and their last paycheck details
    2. Bring a witness from HR: The HR witness can provide guidance on the termination process and ensure the meeting is conducted professionally and follows company policies and procedures
    3. Follow a short, professional termination script: Focus on explaining the reasons for the termination and the steps that led to the decision. Allow the employee to ask questions, but don't let the conversation snowball into a long discussion. You must be clear that the decision is made and not negotiable. Avoid phrases such as ''we are sorry'' or ''I feel bad'' because it weakens your decision and may raise questions as to why you didn't put more effort into resolving an issue leading to termination. Such phrases can frustrate an employee

A sample employee termination script could be structured like this:

“I wanted to meet with you today to discuss the status of your employment with [Company]. After careful consideration, we have decided to terminate your employment effective [immediately/end of notice period date]. We appreciate the contributions you have made to our company and wish you the best of luck in your future endeavors. We will be available to assist you with the transition and answer any questions.”

After termination: pay and benefits

The termination meeting should also include an explanation of benefits the terminated employee will receive.

Final paycheck

The final paycheck should include any unpaid wages, overtime, or other compensation. There may be laws on when you must provide this paycheck. For example, in the US, some states require you to provide the final check immediately upon termination. In other states, you can wait until the next normally scheduled pay cycle.

Severance pay

Severance pay is typically a lump sum payment that helps employees transition to a new job or cover expenses while searching for new employment. The amount of severance pay may be negotiated between the employer and employee, or it may be set by the employment contract or collective bargaining agreement.

In the US, the Fair Labor Standards Act states that a severance package is optional. In other countries, employees may be entitled to a certain number of weeks of severance pay based on their length of service.

Severance package

Aside from a lump-sum cash payment, a severance package may also include continued health insurance, the services of an outplacement program such as career coaching, visa or migration support, and accelerated stock option vesting.

Country-specific benefits

You may be required to provide specific benefits by law. 

For example, in the US, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows terminated workers and their families to continue using their healthcare coverage for a certain period.

Other countries may mandate paying out unused vacation time or accrued annual leave.

Unemployment insurance

In some countries, employees who are terminated may be eligible for unemployment insurance benefits. You may be required to submit necessary documentation to the employee or the government to help them apply for these benefits.

Transitioning the employee out of the business

Close out the employee’s role after their departure with these remaining housekeeping steps:

Remove them from company tools and accounts

As part of standard offboarding procedures, remove the employee from any company tools or accounts. Collect any company property, such as computer equipment, access pass, or tools.

Announce the departure to the rest of the team

The rest of the team may notice if someone is no longer here, so it may be necessary to announce the employee's departure to the rest of the team. Even when other employees keep their job, knowing a coworker has lost their job can cause concerns.

Be respectful and professional when making this announcement, and avoid discussing any sensitive or confidential information. Be prepared to address any questions or concerns.

Hire a replacement

If the terminated employee’s role is important to business operations, it may be necessary to hire a replacement. You may wish to take the opportunity to restructure the new role—having a clear idea of the skills and responsibilities required will help you find a suitable new hire.

Related: How to Hire International Employees: Three Options and an Alternative

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Finding an ideal candidate is always a reason to celebrate. However, terminating an employee can be a nightmare for human resources and the entire organization.

Deel helps you hire and fire international employees legally and gracefully. Book a demo today to see us in action.

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