An employee termination letter notifies the employee that they have been fired, lists the next steps they need to take, and explains the compensation or benefits that they are due to receive. Handling the employee termination process professionally is just as crucial as the onboarding and hiring process. Sending an employee termination letter is the most common practice for effective and respectful employee dismissal. In this article, we’ll explain what an employee termination letter is, how to write one, and we will also provide you with samples to help guide you.
What is an Employee Termination Letter?
An employee termination letter is an official notice letting an employee know that they are being dismissed from their current job/position. The letter comprises the details for the involuntary turnover, lists the next steps the employee must take, and explains the compensation and any benefits that they are set to receive. Termination letters, also referred to as a letter of separation, contract termination letter, or notice of termination of employment.
When is the Employee Termination Letter Used?
For businesses that hire “at-will” employees, meaning that they can terminate their employment at any time without notice, a termination letter is generally used as a courtesy and requirement of the internal HR policies. Typically, termination letters are used during the following circumstances:
- With Cause: This is where an employee is terminated based on their performance and behavior
- Without Cause: This refers to employee dismissal due to company downsizing and broader market factors that are unrelated to the employee’s performance or fit within the company.
- End of a business contract: This letter is used to terminate a business relationship with another party you previously agreed with.
In most states, The Fair Labor Standards Act has no requirements stating that an employee must provide a termination letter or notify an employee of their dismissal ahead of time, except when the employee is part of a collective bargaining agreement or part of a union.
Why are Employee Termination Letters Important?
While it may not be a prerequisite for employers to provide their employees with termination letters, many choose to do so to maintain a good company reputation and keep records for legal purposes.
Termination letters are a more respectful and compassionate way to dismiss employees. Giving employees timely notice affords them some time to handle external situations that will help change their unemployment. The letter also gives employees a full understanding of the details of their dismissal. It is essential to show respect and support for an employee and assist them with their transition. This fosters a better relationship between the company and the employee.
As long as the termination of the employee is non-discriminatory and no contract or union agreement is in place, the employer can terminate the employment any time for any reason. In the case of possible litigation, having a termination letter will provide confirmation of the dismissal, provide a receipt of the company property, and specifically highlight the effective date of termination.
How to Write an Employee Termination Letter
Letting someone that you’ve worked with for a long time is a difficult task, and it is important that you make sure the employee doesn’t feel cheated or degraded. If your disciplinary or evaluation processes work well, the employee ought to have had some warning that termination may be becoming. To make the process smooth and effective, make sure to arrange a brief meeting with the employee to let them know they’re fired even before you send them the letter.
There are some instances where you will need to let go of employees temporarily – this is known as furloughing. Employee furloughing is mandatory for partially paid time off or unpaid leave, during which employees are eligible for unemployment benefits together with other benefits such as health insurance. Several instances may prompt furloughs, for instance, organizational restructuring or cost reduction. You should inform your employees of this arrangement via employee furlough letters.
Both employee termination and furlough letters should be written with two vital elements in mind: compliance and tone. It is in both parties’ interest to close your employment relationship with the employee and on good terms, and a fully compliant termination letter helps reduce the risk of lawsuits.
Here are some basics to pay attention to when writing a termination letter:
- Consult your attorney to make sure that you are legally allowed to terminate the employee and learn more about the relevant terms. For instance, in some states, you may be required to give ample notice, reasons for termination, and severance pay. Also, if you are laying off the employee, there might be specific regulations that you might have to adhere to.
- Decide on what the last day of the employee will be before writing the termination letter. Consult their manager and/or the supervisor to check if they have any pending projects before you decide on the exact date.
- Collect all policies that are active after the employee has been terminated, so that you can remind them in the letter.
- Use our free samples as guides, but mind the tone of your final version. Be sensitive enough, but firm. If need be, request your colleagues to read the letter and let you know if there is any information that you need to change.
Sample Termination Letter Without Cause
This sample is for the letter of termination due to organizational downsizing:
September 7, 2020
This is to inform you that your employment with Fourways Limited will end as of September 31, 2020.
Over the past 6 months, Fourways Limited has been struggling for work in our industry, thus leading to financial difficulties. We have explored different options to try and increase the demand for labor, but unfortunately, our efforts bore no fruits.
Therefore, the company has resolved that we must reduce our workforce by 15%. We regret to inform you that your position is part of this reduction, and your job title has therefore been declared redundant. This decision is not subject to change.
This month’s paycheck will be issued to you after your final day with us, as well as payment for the remaining leave days you have. Additionally, you are entitled to receive a $15,000 severance payment. Kindly sign and return the attached claim document to ensure you collect this payment.
Your healthcare benefits remain valid for an additional 120 days after termination.
Please return your Identification badge, company cellphone, and car keys on your last day of work.
Please remember that you have signed several confidentiality agreements. Review the attached copies.
We have assigned a representative from the Human Resources Department who will set up a meeting with you to discuss the details regarding your benefits. She will also provide you with an outplacement firm service to help you in your next job search. Your representative is Hayley Davis. If you have any questions, please contact her at 317-481-5552.
Please accept our gratitude for your contributions during your employment term with Fourways Limited.
Shalom Quinton, Principal HR.
Sample Termination Letter With Cause
This sample is for the letter of termination due to organizational downsizing:
November 12, 2020
We regret to enlighten you that your employment with Madison Limited will be terminated as of November 16, 2020.
We have resolved to this decision because of the following reasons:
On March 6, 2020, you absconded duties without approved leave. We provided you with a formal written warning explaining that your absence violated our company’s stipulated attendance policy.
June 17, 2020, you had a second absence from work without approved leave. You were issued with a second formal written warning, and we informed you that a third warning would result in your immediate dismissal.
November 6, 2020, you again absconded duties without approval, resulting in your termination.
Your final paycheck will be mailed to your address. Your healthcare benefits will be valid for 60 days from the termination date of November 16, 2020.
Please return all the company assets in your possession by close of business day, November 13, 2020.
Kindly remember that you have signed a non-disclosure agreement with us, attached herein, for your review.
For any details regarding your compensation, policies, or benefits, please contact the HR manager, Nelly Smith, at 324-000-000 or firstname.lastname@example.org.
William Parker, Human Resources.
Sample Termination Letter Due to Poor Performance
September 10, 2020
Dear Mr. Charles,
This letter is to meant to inform you that your employment with Jack of All Trades company will end as of October 1, 2020. This decision is not reversible.
We decided to dismiss you due to the following performance reasons:
0n April 15, 2019, you received performance coaching and were informed that your performance was deficient and that you needed to improve if your employment with Jack of All Trades ltd were to continue.
On April 15, 2020, you were issued with a second warning, and you were given a period of four months to improve your performance failure to which you will be terminated.
Unfortunately, our current performance assessment indicates that you have failed to meet the agreed-upon performance targets. Following this, your employment has, therefore, been terminated.
Your final paycheck for this month shall be mailed to your address. Once you have presented a copy of the attached release of claims document, you shall receive a severance paycheck of $8,000.
Your health care benefits shall remain valid for 60 days from your termination date.
Please make it a point to return all the company assets, including company uniforms, company laptop, and identification badge by close of day September 9, 2020.
If you need any clarifications regarding your compensation benefits, company property, or policies, kindly contact Mary Jane at 676-3618.