How to Craft Your Employee Termination Policy (Template Included)
September 30, 2024 written by Rebecca Ahn
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Whether voluntary or involuntary, employee terminations are never fun for any organization or HR leader to handle. To make the process a whole lot easier, we highly recommend that you have a termination policy crafted in advance and ready to help you when you need it.
Creating crucial documents like this ad-hoc last minute–or not having them altogether–can make a termination much more stressful than it needs to be. You also need to ensure that how you handle terminations at your organization is completely legal and in compliance with all local, state, and federal laws.
So what do you need to consider when crafting or updating your very own termination policy? In this article, we will review a sample termination policy template and dissect all of the essential components to craft your own employee handbook termination policy for your organization.
What Is a Termination Policy?
A termination policy is a written document that details how all types of terminations will work inside your organization. It goes over every step of the termination process to not only help keep management and HR on track, but to also show employees what they should expect.
In general, a termination policy is pretty high-level. Of course, it should cover every step of the process, but it doesn’t need to go into extreme detail because every situation is different. So your termination policy needs to be broad enough to fit various different termination scenarios while also providing enough detail to make the process clear for employees to follow.
In the end, your employee termination policy document should provide your staff with sufficient information while providing HR with a checklist of processes to follow, allowing everyone to be on the same page when it comes to termination.
Why Do You Need a Termination Policy?
As our very own VP of HR Lauren Lippello explains, a lack of a termination policy can cause “general confusion for the employee on whether the process applies to them and what to expect. Not having a policy can also open up the company to liabilities, most often in the form of legal or compliance issues. As an HR professional, we find that using a policy as a tool to align all parties involved in a process eliminates questions as to why a termination is occurring, and it reduces the company’s exposure to liabilities.”
What Is an Example of a Termination Policy?
Let’s start with an example termination policy to give you an idea of what your own employee handbook termination policy should entail. Below is a termination policy template that you can copy and customize for your own organization.
| COPYABLE EXAMPLE:
[Organization Name] Employee Termination Policy Effective: [Date] I. Policy Purpose
II. Types of Terminations 1. Voluntary: A voluntary termination of employment is an employee-initiated dismissal. This could occur when an employee submits notice of resignation or retirement to their supervisor, when an employment contract expires or is completed, or when an employee is absent from work for [insert number] consecutive workdays and fails to contact their supervisor (job abandonment). 2 Involuntary with cause: An employee may be discharged for any legal reason, including but not limited to: misconduct, tardiness, absenteeism, unsatisfactory performance, or inability to perform the essential functions of their job. 3. Involuntary without cause: This type of involuntary termination is a management-initiated dismissal that does not refer to an employee’s conduct. This may result from situations such as layoffs, reductions in force, plant closings, or mergers and acquisitions. 4. Death of an employee: An involuntary termination due to the death of an employee will be made effective as of the date of death. 5. Non-terminations: Employment interruptions, including but not limited to furloughs, reduced work hours, or family or personal medical leave, will not be considered terminations in the context of this policy.
III. Employee Termination Policy 1. This policy applies to all of our active employees, including those currently on leave. 2. In cases of voluntary terminations such as resignation or retirement, the employee must submit official written notice to their immediate supervisor consistent with the minimum notice requirement, so that our company can make arrangements for handling the remaining workload of the position. This notice letter must be copied and submitted to the Human Resources department. 3. In cases where an involuntary termination is being considered, we will follow a fair and consistent process before deciding to terminate an employee. When possible, this could include providing the employee with verbal or written warnings, performance feedback, support and coaching, and an opportunity to improve. Termination will generally result after [insert number] warnings. Depending on the circumstances, it may also be possible to consider alternative options, such as a demotion or a transfer to a different role, instead of termination. 4. In making an involuntary termination decision, our company will review clear and documented records that support consideration of termination, including any performance issues or policy violations. These documents will be referenced in subsequent meetings that lead to a decision. When possible, a termination meeting with the employee, supervisor, and a human resources officer may be scheduled to inform the employee of the decision and give them the opportunity to ask questions and express their concerns. 5. In cases of involuntary termination without cause, we will provide the employee with appropriate notice, in accordance with applicable laws and company policies. 6. At all times, proper employee records will be kept containing all relevant documentation. A lawyer will be consulted prior to termination to ensure the legality of any actions taken. 7. We will treat all employees with respect and dignity during the termination process, and will maintain confidentiality to the extent possible. 8. Our company is bound by the law to refrain from wrongful dismissals of employees. Therefore, we expect all employees with the right of terminating subordinates to strictly refrain from discharging someone without adequate reason or without giving notice. Such an occurrence may be damaging for our company’s respectability and may result in disciplinary action. Discharge on grounds of discrimination or filed health and safety complaints is unlawful termination prohibited by legislation. 9. If a terminated employee feels they have been discharged on unlawful grounds, they have the right to seek legal recourse and appeal the decision of their termination.
IV. Severance and Additional Support 1. When severance pay is applicable in the case of an involuntary termination without cause, it will be officially stated in a written notice delivered to the employee in an appropriate amount of time, in accordance with applicable laws and company policies. 2. Severance pay is discretionary based on the situation, and will be determined on a case-by-case basis. Additional benefits may also be offered with the severance package, including but not limited to: continuation of company-sponsored insurance plans (COBRA), bonus pay, or stock options. 3. In cases of involuntary termination without cause, we may also provide the terminated employee with additional support in the form of outplacement services and reference letters.
V. Employee Offboarding Process 1. For the purposes of this termination policy, the date of separation is defined as the final day an employee will work for our company. 2. All terminated employees will be offboarded in accordance with the following/attached Offboarding Checklist [attach or insert checklist here]. 3. Human Resources will conduct an exit interview with all terminated employees prior to their date of separation. During this interview, employees will receive information about severance pay, COBRA, and other benefits such as outplacement services. 4. Terminated employees will receive their final paycheck within [insert amount of time] of their date of separation, in accordance with applicable laws and company policies. The terminated employee may also be compensated for accrued vacation time, sick pay, and/or volunteer days when appropriate, in accordance with our company PTO policy and applicable laws. In cases of an employee’s death, the final pay due to that employee will be paid to the deceased employee’s estate, or as otherwise required under state law. 5. On the date of separation, the terminated employee will be responsible for returning any company equipment and materials. Their access to all company systems and internal resources will also be terminated by this date.
VI. Surviving Staff Communication Plan 1. In the event of an employee termination, we will formally notify all remaining staff and key stakeholders in an appropriate amount of time prior to the date of separation, in accordance with applicable laws and company policies, and provide a forum to address any questions or concerns. 2. This will also include communication about the plan to manage and support any resulting increase in workload for surviving employees.
We are committed to following a fair and consistent process when making the decision to terminate an employee’s employment, and believe that providing a transparent employee termination policy is an important part of that commitment. |
Feel free to copy and customize this termination policy template to craft your own employee handbook termination policy. Of course, remember to review your termination policies and procedures with your legal team before releasing internally to ensure that you comply with all applicable laws.
Before resorting to terminating employees, especially in a layoff or other reduction event, it’s also important to make sure you’ve considered all of the cost-saving alternatives that could have the minimal impact on your employees and company brand. If you do decide to move forward with an involuntary termination such as a layoff, click below to download our free complete guide on handling layoffs to help you navigate the delicate termination process.
How Do I Create a Termination Policy?
Let’s break down this termination policy template into its key components and what you’ll need to include as you craft your own employee handbook termination policy. There are a few essential elements to ensure your policy is as thorough and thoughtful as possible. Keep these in mind as you customize this template for your organization.
Here are the five essential components for your employee termination policy:
1. Explanation of different types of terminations
2. Overview of your termination policy and procedures
3. Additional severance, benefits, and support
5. Outline of the employee offboarding process
6. Communication plan for surviving staff
Let’s dig into these sections to discuss everything you’ll need to cover in each one to ensure a complete and comprehensive termination policy for your organization.
1. Types of Terminations
To start, you’ll need to define what types of terminations the policy will cover, and define what each means. This is very important to help your staff members understand the difference between a voluntary termination and an involuntary termination, and how that distinction would impact the termination policy and process. We’ve written about the differences between the two before, but here’s a brief refresher.
A voluntary termination is when an employee leaves on their own accord. For example, if an employee gets a new job, puts in their required notice, and then makes an exit from the company, that would be considered a completely voluntary termination. This would also apply if an employee gives notice of retirement, or if they fail to show up at work for a specified number of days without notice.
Firing an employee is an involuntary termination with cause, meaning the employee has done something to be discharged from the organization, such as poor job performance or violating company policies. However, there are some important differences to understand between firing and laying off an employee, as well as between a firing and an employee deciding to exit of their own volition.
On the other hand, an involuntary termination without cause occurs when an employee has no control over their termination at all. Examples of this include layoffs, reductions in force (RIFs), plant closings, or mergers and acquisitions. Another example could be the death of an employee, which is a relatively more straightforward, but hopefully less common, situation to face.
There are also less permanent situations that constitute an interruption of employment, but not a complete termination. These include furloughs, reductions in work hours, and family or personal medical leave. It’s important to define these as well and explain how these cases may or may not be covered by your termination policy.
It’s vital that your employees understand the differences between these various types of terminations. If not, they will have a harder time understanding how the process works and how to navigate it smoothly and successfully. This could have numerous negative side effects, such as leading them to lodge legal complaints against your company. They could even damage their own future job opportunities if, for example, they are telling people they were fired when they were really laid off. So it’s essential that your termination policy begins with clearly defining these voluntary and involuntary terminations to start everyone off on the right foot.
2. Employee Termination Policy and Procedures
This section is where the details of your organization’s specific termination policy will be covered. The goal is to explain the core rules and processes for your termination policy as succinctly as possible. This includes who the policy applies to (e.g., all employees), what can trigger a firing or involuntary termination, how and when any warnings may occur leading up to that point, as well as delivery of the final termination notice.
This should be a high-level overview of the typical termination clauses for how infractions will work and how disciplinary actions will be taken. For example, explain that if someone breaks any of the company rules or policies, their manager may suspend them until HR has launched an investigation.
You will want to include what rights your employees have in the event of their termination, such as the required notice period length, anti-discrimination laws for protected categories such as employees on military leave, and the right to appeal if they believe they were terminated unfairly. So make sure you cover these in this section of your termination policy as well.
All of these details will depend on your organization and the applicable laws in the locations where you are doing business. As our VP of HR Lauren Lippello adds, “It’s important to keep in mind the type of organization that you are building the policy for. Is your employment population solely based in one country? Are you a global organization? The policy will need to fit the labor laws of the different jurisdictions of the organization and, in some cases, you may need to adapt a few different versions to align with the compliance of these locations.”
This also makes it important to always have your legal team review these policies after you draft them, as well as before implementing an actual termination or workforce reduction, to make sure you are covering all your bases and to provide any legal guidance. Remember, we are not lawyers and this is not legal advice. So make sure you are seeking your own legal counsel.
You can also see that the policy doesn’t need to go that long or in-depth. You aren’t writing a novel here–just making sure that everyone in the organization can easily understand the processes that are at work when someone is terminated.
3. Severance, Benefits, and Additional Support
The next section of your termination policy is where you specify the situations in which terminated employees will receive severance, and a high-level overview of how that severance will be calculated. This also includes any other benefits that will be included in the severance package, such as the continuation of company insurance plans with COBRA, bonus pay, or stock options.
This severance policy should comply with your local and state laws regarding when an organization is or isn’t required to pay severance. For example, this might only apply to workers who are involuntarily terminated due to a layoff, RIF, or other business decision that is outside of the employee’s control. If the employee leaves on their own, these benefits are typically not offered. Of course, you can still offer them even if your state doesn’t require it. It may be a good idea to do so to help negate the possibility that your company will be sued for wrongful termination. Just make sure you clearly state which scenarios will qualify for severance in your termination policy.
It’s also a good idea to offer additional support to help your terminated employees survive until they find new work. This could include offering a reference letter to aid in their next job search. But most commonly, this comes in the form of outplacement services, which includes career coaching, resume writing, online job search tools, virtual workshops, and more to help individuals find new, fulfilling employment as quickly and painlessly as possible.
4. Employee Offboarding Process
Offboarding is an often neglected part of the termination process, but is just as crucial to a smooth and successful employee termination. It has been proven time and time again that companies with proper offboarding policies have a competitive advantage over those that do not, with some studies claiming that exit interviews can save companies billions of dollars per year. So it goes without saying that we highly recommend that you have a proper plan in place to ensure that people are offboarded in the right way, regardless of the reason.
For your termination policy, you once again only need to cover the high-level details of what happens when someone is offboarded. This includes a checklist of the necessary offboarding steps, including setting the date of separation, scheduling the exit interview, and sending terminated individuals information about their severance pay and other benefits like outplacement, how their unused PTO (and other accrued days) will be paid out, and how their final paycheck will be delivered to them, and then collecting any company equipment and access they will need to surrender on their final day of employment.
5. Surviving Staff Communication Plan
Last, but certainly not least, it’s helpful to include a plan for how you will communicate the termination to your surviving employees to help protect their morale and your company brand. It’s not uncommon for staff remaining at the company after a workforce reduction, especially a larger reduction event like a mass layoff or RIF, to struggle with survivor guilt. So it’s essential that you have a plan in place to keep them informed, engaged, and motivated to continue driving forward on the shared mission, vision, and goals.
Termination Policy: Final Takeaways
This guide has provided a very high-level overview of what a termination policy can look like at your organization, and what components you’ll need to include as you craft your own employee handbook termination policy from our termination policy template above.
Remember that all organizations are different and require different processes to work properly. If you plan appropriately, terminations do not have to be stressful and laborious tasks. You can make the process easier by making sure that everyone in your organization understands what a termination means and how they will be conducted before it actually happens.
A thorough and thoughtful termination policy is essential for ensuring your organization is prepared to handle every aspect of an involuntary workforce reduction. Make sure it includes:
- Explanations of the different types of terminations you may face
- All of the rules and details of your termination policy, including your policy for rehiring employees after they’ve been terminated
- The severance, benefits, and support your terminated employees may receive
- The complete offboarding process through their final day of employment
- Your communication plan to surviving staff to maintain engagement and morale
At Careerminds, we believe that you can never be too prepared for your next reduction event. Our arsenal of resources, templates, guides, and industry-leading outplacement services can help you navigate the delicate termination process. Click below to speak with one of our experts and see if we are the right partner for your organization.
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