How to Terminate an Employee Legally and Gracefully
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Saying ''you're fired'' is never easy. Most HR professionals agree it’s the worst part of the job. But terminating employees is sometimes inevitable: keeping someone who does more harm than good brings down the entire team.
Still, no one deserves to get fired without just cause and proper notice. Also, there are laws about how to properly terminate an employee to protect employees, varying by state and country.
In this article, you’ll learn what to do when you notice employee performance issues and start wondering if you should eliminate a troublesome employee. And if those steps don’t improve the relationship, we also explain how to terminate an employee legally and gracefully.
Bring up your concerns with the employee early
Layoffs should be a last resort. They are expensive for businesses (especially given the cost of hiring a new employee) and can be emotionally and financially catastrophic for the terminated worker. Before you consider firing an employee for performance-related concerns, first work with them in good faith to improve the relationship.
Ask about blockers in and outside of work
Many common reasons employees struggle at work are external: burnout, conflicts with coworkers and managers, and stress from home. Termination may seem like the easiest (or only) option but many performance-related issues have simpler supportive solutions.
Once you detect an undesired behavior or lack of specific results, act immediately. Set up a one-on-one meeting, and present your concerns. Strike a balance here: it’s equally important to clarify expectations as it is to understand why those expectations haven’t been met. Once both parties get on the same page about expectations and barriers, the stage is set to find a solution.
For instance, if lateness is the issue, clarify that your office expects punctuality. But saying “don’t be late,” isn’t enough: ask the employee why they run late and what the office can do to find a solution. Perhaps clarifying your expectations is enough but you may find success by adjusting this employee’s schedule or subsidizing a public transit pass to help them get to work on time.
If the employee struggles to complete tasks and deliver results, investigate whether they get enough support from their manager or understand what you expect them to complete.
Document performance issues
Documenting performance issues weekly, monthly, or annually helps you keep track of employees' compliance with the company's policy defined in an employee handbook, the presence or absence of teamwork, and their tenure with the company.
Be transparent, and inform team members about the existence of such documentation. You may even consider sharing it with employees, especially if the issues are still benign, so employees can fix them.
A written record allows you to preserve fairness and evidential protection once things escalate to the point of termination, should it arise.
When documenting performance issues, be sure to:
- Focus on facts and provide examples to avoid bias
- Define measurable and realistic expectations
- Identify and describe consequences
- Standardize all performance issue records for each employee
- Organize an in-person meeting and get an employee's signature
Develop a performance improvement plan (PiP) to fix the issue
A performance improvement plan (PiP) is an action plan a manager, human resource department, and employee develop to eliminate specific performance issues.
A PiP helps both managers and HR identify skill or training gaps and guides an employee to improve performance. It's also used as proof later on, during termination of employment.
Your job as a manager is to create a draft in which you:
- Describe the past performance and current deficiencies
- Define measurable and achievable goals
- Set a timeframe to meet the objectives
- Explain how you will support an employee during this period
- Define how often an employee and a manager will meet
- Clarify the consequences if an employee doesn't meet set objectives
Once you create a plan, send it to HR for revision. Here, HR's job is to eliminate any bias against an employee and ensure you earnestly aim to help an employee–a PiP is not a thinly veiled precursor to termination.
The next step involves meeting with an employee and presenting a plan. Ask for their feedback: you might identify misunderstandings, missing support, or alternative solutions that you couldn’t spot on your own. Modify the plan according to an employee's feedback, then deliver the document (signed by the employee and manager) to HR for approval.
Now, monitor plan progression. Hold regular meetings, talk to an employee face-to-face, document every step, and address missteps as they occur. For instance, if an employee lacks tools, a manager should prove them as soon as possible.
The outcomes of a PiP vary. If an employee meets the expectations before the plan's expiration date, you can close the PiP, congratulate an employee, and allow them to continue employment.
On the other hand, if an employee doesn't meet defined goals, you should also close the PiP and consider reassignment, demotion, or termination of employment.
Relevant: Learn how to fire an independent contractor.
Understand your location's applicable terminational laws
The terms of termination aren't just between employees and their employers. Wrongful termination laws, which vary between countries and states, prevent any type of accusation for wrongful termination.
Specific federal laws are put in place to stop employers from terminating employees for the following reasons:
- Discrimination: Employers cannot fire someone due to their race, age, religion, gender, disability, immigration, or pregnancy status
- Retaliation: Employers cannot fire an employee engaging in legally protected activities, such as complaining about sexual harassment or discrimination or reporting a workplace violation
- Refuse to take a lie detector test: Employers cannot fire an employee who refuses to take a lie detector test (the federal Employee Polygraph Protection Act)
- Reporting the violation of OSHA: Employers cannot fire someone for complaining about work conditions violating federal and state laws
In addition, each state (and non-US country) has unique laws:
Terminational laws in at-will employment states
In at-will employment states, an employer can terminate an employee for any reason at any time, so long as they don’t violate the above federal protections. In addition, an employer can change the terms of an employment relationship, for instance, reduce time-off or terminate benefits, with no notice.
Employees in these states can leave a job for any or no reason, at any time, without facing legal consequences. However, the at-will rule leaves US employees vulnerable to on-call or limited schedules, sudden dismissal, benefits, or pay cuts.
The opposite of an at-will employment state is a “contract state.” In these states, contracts–either written or applied–specify the end of employment. Termination outside the bounds of the contract from either side must have “just cause” to be legal.
Termination laws for international employees
Once you decide to expand your business and hire overseas, you must also comply with each country’s hiring and termination laws. Otherwise, you risk facing penalties and accusations for wrongful termination.
Remember, many overseas workers are familiar with their employment rights and will react once they determine they've been violated. For instance, in Brazil, employment law is part of the constitution–the workforce is most likely familiar with their entitlements and protections.
Also, the US at-will doctrine that allows employers and employees to terminate the employment relationship with or without notice for any non-discriminatory reason is not recognized in many states worldwide.
For instance, in the European Union, the common rule is that an employer and employee notify each other about the termination of an employment relationship in advance and establish a notice period (it can be between two working weeks and a month). Both parties then sign a contract stating that the employment termination results from a mutual agreement (the best case scenario).
Not complying with local laws can harm your company's reputation long-term. Aside from losing the workforce, time, and money to replace an employee, your company can gain a bad reputation in an international talent pool.
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Set and hold a termination meeting
When the PiP fails and termination is the only reasonable solution, do it efficiently but gracefully. The proper way is to do it in person if possible, or face-to-face for remote teams.
Documentation to bring to the meeting should include every written record that backs your decision, such as the PiP results. It should also include a notice of termination and an explanation of additional continued benefits or severance pay, which we’ll discuss below.
Bring a witness from HR
The presence of HR during a termination meeting is helpful for many reasons. First, an HR person has already gone through termination, so they know how to keep the conversation on track and prevent misunderstandings and tension. Next, having a witness helps you avoid legal issues subsequently.
Provide HR with relevant documentation and explain the situation so they can assist you and ensure you terminate an employee legally but with respect.
Follow a short, professional termination script
Don't justify yourself and sugarcoat anything. Explain the reasons for termination, and allow an employee to ask questions. However, don't let the conversation snowball into a long discussion. You must be clear that the decision is made and not negotiable.
Also, avoid saying ''we are sorry'' or ''I feel bad'' because it weakens your decision and may raise questions why you didn't put a bit more effort into resolving an issue leading to termination. Such phrases can frustrate an employee.
Discuss continuation of pay and benefits
The termination meeting should also include an explanation of benefits the terminated employee will receive.
When an employer is required to give the last paycheck to a fired employee varies by state. For instance, in California, an employer is required to pay the worker immediately, the last day on the job. On the other hand, a Connecticut employer must pay a fired employee by the next business day.
Severance pay is any kind of compensation an employee can receive after termination. According to the Fair Labor Standards Act, an employer does not need to provide a severance package to a fired employee.
It is a non-mandatory benefit, but it is a valuable gesture, helping an employee bridge the gap between unemployment and a new job.
Aside from a lump-sum payment, such a package usually comprises continued health insurance, the services of an outplacement program, or even ongoing pay for several months.
COBRA health insurance
The Consolidated Omnibus Budget Reconciliation Act (COBRA) protects terminated workers by granting them and their families the right to continue using the healthcare coverage for a certain period–usually a couple of years, varying by state.
Every business owner with 20+ employees is required to offer continued participation in a worker's health insurance plan. However, a former employee pays the full coverage (on average, 102% of the coverage's cost).
Every terminated employee not responsible for losing the job (didn't quit or was fired for a just cause) may receive unemployment insurance. In the US, this compensation is usually less than the regular pay, and a former employee (unemployed) can obtain it for 26 weeks. However, the payment period may extend to an additional 20 weeks.
Transition the employee out of the business
The termination process doesn't end once you deliver bad news to an employee. You still need to take care of the following segments:
Remove them from company tools and accounts
Once you terminate an employee, make sure to remove them from any account and channels they used while working for you.
Enable an employee to collect their personal belongings and ensure they return everything that's company property, including:
- Computer equipment
- Keys or building pass
- Uniforms and tools
- Other employee-issued property
Announce the departure to the rest of the team
The rest of the team will notice if someone is not in the office for a more extended period, so you should inform them about the ongoing situation. Even when other employees keep their job, knowing someone has lost their job can awaken concerns.
Consider organizing the meeting to explain why the team member was fired. Take the opportunity to check in with other employees to understand whether anything is harming their productivity and performance and offer to help them overcome it.
Hire a replacement
Although you can rely on your team or a manager to take over the project a former employee didn't complete, don't prolong hiring a new employee to take the burden off other team members' shoulders.
You can use the previous experience to make a better selection and avoid past missteps.
Deel simplifies hiring–and firing–employees around the world
Finding an ideal candidate is always a reason to celebrate. However, terminating an employee can be a nightmare for HR and the entire organization, especially small businesses.
Working with a global workforce complicates this process further: hiring, global payroll, and termination processes all introduce local compliance issues that bog down businesses. But working with international employees is a stress-free experience with the right partner by your side.
Deel helps you hire and fire employees legally and gracefully. Book a demo today to see us in action.