Employee Termination Letter Examples and Template

Employee Termination Letter

Employee termination letters are formal documents used to advise employees that their services are no longer required. Employers must adjust their workforce to meet changes in demand for their services and products based on competitive impacts, slower demand in the market, and availability of raw materials. Employee termination letters are extremely important since they set the tone for the termination and the potential ongoing employer-employee relationship. As business picks up, many employers need to add staff and who better to hire, than terminated employees with experience.

There are situations where employees are terminated for cause, i.e. based on performance and productivity not meeting objectives or unacceptable behavior. Contracts may not be renewed for a variety of reasons, however, a formal employee termination letter ends the relationship in a professional business-like manner and positions the relationship for future contracts.

More details and guidelines follow, including what is an employee termination letter when to use them, how to write, a sample letter, and why they are important.

What Is an Employee Termination Letter?

An employee termination letter is used to inform an employee that they are no longer needed at the company and are being dismissed from their position with the company. The letter may include details about the reason for dismissal and any benefits or severance the employee is entitled to receive. It should also include details about their final paycheck and any other information related to the termination, including the effective date.

Employee Termination Letter (Word Template)



    When are employee termination letters used?

    There are three reasons an employee termination letter is typically used. They are considered a formal method to advise an employee or contractor that their employment with the company is ending.

    Without Cause – companies find they need to downsize to match market conditions, i.e. slower sales, slowing market, insufficient raw materials, and a host of additional reasons. The employee’s performance may be on target, meeting all goals and objectives, however, the company must reduce salaries to manage their cash flow.

    With Cause – termination is often due to an employee not meeting company goals and objectives or their behavior does not meet company guidelines.

    Contract Termination – employees who are working at the company as part of a contract that is ending are sent termination letters to formally end the contractual relationship.

    Unionized employees often have termination procedures spelled out in their collective agreement which must be followed. The fair labor standards act does not specify a termination letter is required unless the employee is part of a collective bargaining unit. However, many employers use an employee termination letter to provide a professional formal notice to the employee to avoid any misunderstandings and challenges.

    Essential Elements of an Employee Termination Letter

    There are essential elements that should be included in an employee termination letter to provide a clear and concise message to the employee, avoid misunderstandings and manage what can be very stressful for the individuals involved.

    These elements are:

    • The effective date of the termination
    • The reason for the termination
    • Include impacts on compensation, benefits, and the effective date for insurance plans, etc.
    • Advise the employee of any property they must return
    • Advise the employee of any agreements they must adhere to e.g. non-disclosure, non-compete clauses
    • Provide HR contact details

    Always keep the letter professional even if you have a friendly relationship with the employee. Include the details, but keep it concise and focus only on the details of the termination. All statements in the letter should be accurate and not exaggerated. Stick to the facts of the situation.

    State and federal laws prohibit discrimination. An employee should not be terminated for discriminatory reasons of any kind such as age, gender, race, religion, etc. Consult your local state and also federal laws to ensure that an employee is not being discriminated against. Failure to follow the laws could result in penalties, fines, and sanctions if the employer is found guilty.

    How to Write

    Before preparing the termination letter gather all of the information needed for the letter. The most critical part of the letter is the reason for the termination. You may need to consult with HR, past employee reviews, employee improvement plans, and union contracts or bargaining group contracts.

    The following information should be gathered before preparing the letter:

    • Effective date
    • Employee name and number
    • Address
    • Reason for termination
    • Remaining compensation
    • Status of all benefits and impact
    • Company property that must be returned
    • Non-disclosure or non-compete clauses that must be adhered to
    • References to bargaining agreements if appropriate
    • References to contracts if appropriate
    • The supervisor responsible to sign the termination letter

    Sample – Employee Termination Letter With Cause

    (Employee Name)

    (Full address and)

    (Email – if available)

    (Phone number – if available)

    (Date)

    (Supervisor, or Human Resources)

    (Title)

    (Company or Institution)

    (Full address, and)

    (Email)

    (Phone number)

    Dear (Name)

    This is to inform you that your employment with (Company Name) will end on (Date of last day on the job)

    Dismissal from the company is due to the following reasons:

    (Provide detailed and factual reasons)

    Your company benefits will also terminate on (Provide Date):

    • (Health care benefits)
    • (Life Insurance)
    • (Retirement benefits)
    • (Other)

    Please return the following equipment and property before (Date)

    • (Computer equipment)
    • (Various tools – specify)
    • (Company Car)
    • (Company ID car)
    • (Other)

    Please also note that you are bound to the following agreements signed during onboarding, including:

    • (Non-disclosure)
    • (Non-compete)
    • (Other)

    If there are questions concerning your compensation, benefits, company property, etc., please contact (Supervisor or HR manager).

    Sincerely

    (Signature)

    (Printed Name)

    Sample – Employee Termination Letter Without Cause

    (Employee Name)

    (Full address and)

    (Email – if available)

    (Phone number – if available)

    (Date)

    (Supervisor, or Human Resources)

    (Title)

    (Company or Institution)

    (Full address, and)

    (Email)

    (Phone number)

    Dear (Name)

    This is to inform you that your employment with (Company Name) will end on (Date of last day on the job)

    Over the past few months, our company has experienced a significant downturn in our business leading to reduced sales and income. We have been unsuccessful in exploring other options to downsizing and have been unsuccessful, leaving us with no option. We are reducing our workforce by (XX%). Your position is being eliminated and the decision is final.

    Your final paycheck will be issued on (Date) which will include the remaining vacation days you are entitled to. You are also entitled to a severance package of ($XX.XX). Please sign and date the attached document to ensure that all funds and benefits are will be provided to you.

    Your company benefits will also terminate on (Provide Date):

    • (Health care benefits)
    • (Life Insurance)
    • (Retirement benefits)
    • (Other)

    Please return the following equipment and property before (Date)

    • (Computer equipment)
    • (Cell phone)
    • (Various tools – specify)
    • (Company Car)
    • (Company ID car)
    • (Other)

    Please also note that you are bound to the following agreements signed during onboarding, including:

    • (Non-disclosure)
    • (Non-compete)
    • (Other)

    HR will be contacting you to address any questions you may have and discuss details concerning your benefits transition. We are also providing an outplacement service to help with your job search.

    If there are questions concerning your compensation, benefits, company property, etc., please contact (Supervisor or HR manager) at (email) and (Phone).

    Sincerely

    (Signature)

    (Printed Name)


    How to Terminate an Employee?

    Many companies have procedures and policies relating to terminating an employee for cause, without cause, and workforce adjustments. In all cases, it is important to be fair and to treat the individual with respect and decency, while following federal, state, and company policies. Every situation is different and must be handled appropriately.

    Notice – there are extremes where employees are notified, allowed to collect their personal belongings, and shown the door. This situation occurs in situations where there is concern about security, hostile reactions, or negative influence on the remaining workers.

    While in other situations, employees may be given several week’s notices and the time used to transition work responsibilities to another employee. This is common in a downsizing situation.

    What Day of the week?

    Terminations may occur on any day of the week; however, some may terminate employees on payday so they walk out with their last paycheck. Or at the end of the week if someone is being terminated with cause and there is concern about a hostile reaction. The beginning or middle of the week is also favored by many employers since it provides time for the employee to begin their job search the same week.

    If appropriate allow time for the employee to collect their personal belongings at the end of the day without enduring the embarrassment of their colleagues observing the process.

    Informing the Employee

    Meet the person in person at the workplace, inform the person of the termination, and request all access devices to be returned and handed over – keys, cell phones, fobs, and computer equipment. Usually, the supervisor and an HR representative are present during the termination meeting.

    Teleworkers, freelancers, and employees with remote work environments should be informed via telephone call and termination letter.

    Ending Payroll and Benefits

    Inform the employee when salary will be terminated as well as benefits such as insurance coverage and retirement benefits. Options for continuing or transferring insurance and retirement funds should also be discussed. The employee may want to meet with an accountant to discuss the best options for the transfer of retirement benefits to a bank.

    Why are Employee Termination Letters Important?

    Although most employers are not required to provide termination letters unless required as part of a bargaining unit contract, there are strong reasons to take a more formal approach. For example:

    • Demonstrates a professional approach
    • Maintains a good reputation
    • Records events for legal reasons if the termination is contested
    • It is more respectful and compassionate
    • Provides details regarding final paychecks, benefits, vacation pay, insurance, and retirement issues
    • Maintains a professional relationship between the employee and the company
    • Fosters good relations and confidence among remaining employees about the company

    In situations where the termination of an employee is considered “with cause”, it is important to document the reasons for termination accurately and fairly. Follow federal, state and company guidelines to ensure that the company is not penalized for termination of an employee unfairly.

    Key-points

    Employees deserve to be treated fairly and humanely. An employee termination letter that includes all of the appropriate details of the termination, date, salary, benefits, and the reasons communicates to all parties why the termination is taking place. Following this process enhances the company’s reputation for professionalism and communicates to all employees that they can expect fair treatment from them.

    Employees terminated with cause may be contentious. Ensure that the employee has been provided an opportunity to correct whatever situation they are involved with before termination. They should have a fair and reasonable chance to improve their situation, whether it is lack of performance, attention to details, etc.

    Keep the employee termination letter concise and to the point covering the effective date, the reason for the termination, salary and benefits, return of company property, and attention to agreements previously agreed to by the employee during onboarding, e.g. non-disclosure and non-compete clauses.Employee Termination Letter

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