Termination Policy: What HR Should Consider (Plus a Sample)

October 08, 2018 by Josh Hrala

Terminations are never a fun thing for any HR leader to handle, especially when they are involuntary. To make the process a whole lot easier, we highly recommend that you have a termination policy fully crafted so that you can use it when you need it.

Creating documents like this ad-hoc – or not having them entirely – can make a termination a lot more stressful than it needs to be. Plus, you need to ensure that how you handle terminations at your organization are completely legal, complying with all local, state, and federal laws.

So what do you need to consider when crafting or updating your very own termination policy? We have you covered.

Let’s dig in.

What Is a Termination Policy?

A termination policy is a written document that details how a termination works inside your organization. It goes over every step of the process to not only keep HR on track but to also show employees what they should expect.

termination policy

In general, a termination policy is pretty high-level. Yes, it goes over every step of the process, but it doesn’t go into extreme detail – largely because every situation is different.

In the end, the document should provide information to your staff while providing a path of processes to follow for HR, allowing everyone to be on the same page when it comes to termination.

What Do You Need to Include In Your Termination Policy?

Good question.

To start, you need to make sure that define what the policy is all about. This may seem like a no-brainer but it’s very important that your staff members understand the difference between a voluntary termination and an involuntary termination.

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 two-week notice, and then makes an exit, that is completely voluntary.

Firings are often labeled as a voluntary termination, too, because the employee has done something within their power to get terminated from the organization.

An involuntary termination is when an employee has no control over their termination at all. Layoffs, RIFs, plant closings, and others are great examples of involuntary terminations.

It’s vital that your staff understands the differences between these two forms of termination because if they don’t, they will not understand how the process works and potentially try to lodge a legal complaint against your company or even damage their future job opportunities by telling people they were fired when they were really laid off.

So, at the top of your termination policy, you should clearly identify what constitutes a voluntary and involuntary termination to start everyone off on the right foot. Also, at the top, explain briefly how infractions work. For example, explain that if someone breaks the rules, their manager may suspend them until HR has launched an investigation, and things of that nature.

After that, you can get more in the weeds about how these terminations play out.

Termination Policy: The Core

The intro is very important when crafting your termination policy. However, the middle is where a lot of details come into play.

You need to explain – in very few words – some core details, such as who the policy covers (all employees), reiterate what an involuntary termination and voluntary termination are, what can trigger an involuntary termination, how warnings work before a firing, how those warnings are documented, and how many warnings an employee gets.

Here’s a sample of what this can look like:

  • This policy applies to all employees.
  • If an employee initiates leaving the organization that is voluntary, if the organization initiatives leaving, that is involuntary.
  • Involuntary terminations can happen for several reasons: performance, layoffs, etc.
  • When possible, employees will be warned and counseled on the involuntary termination. This is not a guarantee based on certain events or situations.
  • Any prior warnings will be documented in the personnel file. Termination will generally result after ______ warnings.

As you can see, these details largely depend on your organization and your local laws. Always make sure to consult your legal counsel before holding a RIF or termination to ensure that you have followed the law to the letter.

You can also see that the policy isn’t super 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.

Next, you need to move into severance and how that works.

Termination Policy: Severance and Details

You need to have a spot on your policy where you mention that severance is only given to workers who are involuntarily terminated (by a layoff, RIF, or some other business decision that is outside of the employee’s control).

While many states do not have laws on the books (always check, though) that say that your organization has to pay severance at all. It’s a very good idea to do so to help negate the possibility that your company will be sued for wrongful termination. You can read all about severance agreements here, and download our sample below.

Download Our Guide To Improving Severance Agreements!

Normally, as a quick refresher, severance and outplacement services are only offered to employees who are involuntarily terminated, though. If the employee leaves on their own, these benefits are typically not offered because there’s no real point to.

Again, make sure you are following the laws that dictate how terminations work wherever you are doing business.

Termination Policy: Offboarding

Offboarding is a buzzword right now, though the fact remains that many companies skip proper offboarding procedures because they – inaccurately – believe that there is no ROI to holding exit interviews and things of that nature.

This is wrong. It has been proven time and time again that companies who have proper offboarding policies on the books have a competitive advantage over those that do not, with some researchers claiming that exit interviews can save companies billions of dollars per year.

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That being said, we highly recommend that you have a proper plan in place to ensure that people are offboarded – regardless of the reason – in the right ways.

For your termination policy, you only have to – again – go over the high-level details as to what happens when someone is offboarded.

This includes going over when the ‘separation date’ – the final day of employment – is, when an exit interview will occur, when terminated individuals will receive information about COBRA, severance, outplacement, how their PTO time (and other accrued days) will be paid out, and how their final check will be paid to them.

Here’s a sample of how this may look (plus the severance checkpoint from the previous section):

  • Severance pay is discretionary based on the situation.
  • The separation date is the last day an employee will work for the organization.
  • Employees will receive an exit interview from HR. During this interview employees will receive information about COBRA, and other severance benefits like outplacement.
  • Accrued paid time off, sick pay, and volunteer days will be paid out in accordance with the organization PTO policy.
  • Terminated employees will be paid according to federal and state laws.

Termination Policy: Takeaways

This guide has provided a very high-level overview of what a termination policy can look like at your organization.

Please 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 how terminations work and how the move will go down before it actually happens.

Want to download our sample termination policy? Click below.

termination policy

Josh Hrala

Josh Hrala

Josh is an HR journalist and ghostwriter who's been covering outplacement and offboarding for over six years. Before pivoting to the HR world, he was a science journalist whose work can be found in Popular Science, ScienceAlert, The Huffington Post, Cracked, Modern Notion, and more.

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