Employee Terminations: A Step-by-Step Checklist
It’s always tough to terminate an employee. Not only can it get emotional, but there are multiple steps that must be done correctly to protect the company from lawsuits, government investigations, unemployment claims, etc.
Here are some things to plan on for each and every employee termination.
Make sure the termination makes sense.
While firing an employee may be the best decision, sometimes it’s not. The termination could land you in legal hot water, negatively impact team morale, or lead to consequences you might not have even thought about. If you’re not sure what to do, we at My HR Guy are happy to give you an outside perspective on whether to fire an employee in the situation you're in, or if there’s another recommended path.
Be fully prepared for the termination.
Yes, you want to prepare yourself mentally for the difficult conversation. But it's more than that. If you don’t know all the required termination steps, or the relevant laws in your specific state, or your formal company policies, you can get into trouble. Don’t worry! Keep reading to learn many of the key steps, which you can use as a checklist.
Prepare a separation notice.
You should always fill out and provide a separation notice for a termination. Some states require that you use a specific form. Even if your state doesn’t require a separation notice, we highly recommend it. Providing the relevant details in writing can reduce the chances of an unemployment claim or lawsuit. Let us know if you have questions about defining "relevant details" in a given situation so that you don't share too much or too little.
Hand out state-specific required information.
Many states make you distribute specific pamphlets or notices at termination. Clients of My HR Guy can find these available by state in the HR Vault. If you provide medical insurance for employees your separation notice should usually include COBRA information, so don’t forget to address that.
Collect company property from the employee.
It’s a good idea to prepare a list of any company property that the employee was responsible for so you can retrieve it from the employee as they’re terminated. It’s better to get your property back when the employee is still with you... once they’re gone, it gets much harder!
Plan for the final paycheck.
One of the easiest ways to end up in a lawsuit is to fail to abide by state final paycheck laws. No matter where you do business and what the rules are, we recommend that you have the final check processed and ready to hand to the employee during their separation meeting. Even when you’re legally allowed to wait until the next payday, it delays a complete separation.
Also keep in mind for the final paycheck:
Figure out which leave needs to be paid out (if any). Paid leave payouts are impacted by both state law and your company policies (e.g., what’s documented in your employee handbook). If you need to pay something, make sure you calculate the total carefully and provide detailed documentation.
Provide all wages due. Consider whether you owe commissions, spiffs, or payment for partial work completed. If the employee needs to attend a separation meeting at the office, or has to inventory company equipment before leaving, you need to pay them for that time as well.
Confirm deductions. Some deductions, like insurance, may legally be taken from final paychecks and should be processed in the standard fashion. However, anything that’s different from a standard deduction (e.g., payment for missing uniforms, repayment of a tool loan account) needs to have an additional payroll deduction form signed by the employee at the time of separation, listing the specific dollar amount. If the employee refuses to sign, it’s best to just pay out the full wage without the deduction. If you feel strongly about reclaiming the cost/company property, you can consider taking legal action. In the meantime, a full payout reduces the risk of the employee taking legal action against you.
Hold a termination meeting.
The meeting should be held somewhere private (like a closed office) and include you, the terminated employee, and another management-level employee to serve as a witness. We recommend you keep these short and sweet. Clearly present everything you’ve prepared, and briefly go over each document. Do your best to avoid any arguments or debates. Try to get the employee’s signature on the separation form, along with any payroll deduction forms… but don’t be surprised if they refuse to sign.
Finalize the termination in all systems.
After the meeting, ensure that all systems are updated as needed. This may involve terminating the employee from your payroll/HRIS software and benefit plans, as well as cutting access to shared drives, phones, emails, accounting software, etc. Be sure to document ALL systems where you need to remove access (especially remote access) because it’s easy to forget or miss something.
Termination lawsuits are some of the most common lawsuits in the workplace. Follow these tips, or come to My HR Guy with your questions, to avoid having to deal with this!
