I say this: terminating an employee is never an easy decision, but the financial consequences of mishandling this process can be staggering. Wrongful termination settlements routinely reach six figures, with discrimination or retaliation cases often surpassing the million-dollar mark. Even before reaching a courtroom, companies face average legal defense costs of $75,000 for pre-trial settlements, skyrocketing to $125,000 or more if the case proceeds to trial.
It gets even worse when terminations are mismanaged. Delayed action can inflate costs by 4 to 10 times due to prolonged wages, legal fees, and productivity losses. Fabricating reasons for dismissal triples the risk of punitive damages.
In one extreme case, a company was ordered to pay $1.5 million in a retaliation case involving falsified termination documentation. Another faced legal fees alone of $546,684 for a single wrongful dismissal lawsuit.
As a business owner, you cannot afford to ignore these risks. The following guide will equip you with the knowledge and strategies to navigate employee terminations legally, ethically, and cost-effectively.
In this guide, I’ll show you how to fire an employee the right way, based on my experience working with hundreds of companies. I’ll also provide you with employee termination meeting scripts that you can use. I’ve also included comments from an employment lawyer I work closely with, Micah Fysh at Littler LLP.
Remember, while I believe this guide is thorough, it’s crucial that you consult with your legal counsel and HR professionals to ensure compliance with local laws and regulations. Every situation is unique, and you’ll want to make sure you’re covered from all angles.
How do You Know When It’s Time to Terminate an Employee
Knowing when to terminate an employee is just as important as knowing how to do it. In my years of experience, I’ve found several signs that might indicate it’s time to consider termination.
First and foremost, poor performance is often a clear indicator. If an employee consistently underperforms despite feedback and opportunities for improvement, it may be time to let them go. Personally, I believe in giving people chances to grow, but there comes a point where continued poor performance simply affects the entire team. You’ll know when you’ve reached that point: it’s when you start feeling a sense of relief at the thought of them not being there.
Serious violations of company policies, such as harassment, discrimination, or theft, often warrant immediate termination. I’ve seen situations where business owners hesitated in these cases, and it almost always led to bigger problems down the line. You gotta trust your gut on this one. You don’t want to set a precedent where company rules are seen as guidelines rather than strict rules. This can make it more difficult to terminate for other employees breaking these rules.
Sometimes, an employee might be technically competent but doesn’t align with your company’s values or culture. In my experience, this misalignment can be disruptive to the entire team dynamics. I remember a situation where one of our clients had a brilliant developer who just couldn’t get along with the rest of the team. Despite their technical skills, the negative impact on team morale was too significant to ignore.
I’m a big fan of Netflix’s “Keeper Test” approach. Ask yourself: “If this person were to quit tomorrow for a similar role at another company, would I fight hard to keep them?” If the answer is no, it might be time to consider letting them go. This test has helped me and my clients make some tough decisions over the years.
As your company evolves, some roles may become obsolete. You may want to consider terminating an employee, if you can’t repurpose that employee’s skills for other areas of the business. It’s not personal, It’s about the changing needs of the business. Think about it, carrying excess staff can strain the company financially, potentially putting everyone’s jobs at risk.
Lastly, if you’ve had multiple documented conversations about performance or behavior issues and seen no significant improvement, it may be time to part ways. In my experience, when you’ve reached this point, you’ve usually given the employee more than enough chances to turn things around.
It goes without saying that firing should never be a snap decision. It should be the result of careful consideration, documentation, and attempts at correction (except in cases of gross misconduct). Make sure you’re making the right decision for the right reasons.
How to Prepare for the Employee Termination
Once you’ve made the decision to terminate an employee, you want to prepare. I can’t stress this enough, the more prepared you are, the smoother the process will be for everyone involved.
Document everything! Make sure you have a clear record of performance issues, warnings, improvement plans, and any other relevant information. This protects both you and your company in case of potential legal issues. I’ve seen situations where lack of documentation came back to haunt companies, so do it properly.
If you have an HR department, involve them in the process. If not, I strongly recommend engaging an HR Consultant (DM me for an intro to one) or consult with an employment lawyer (such as Micah Fysh, whose comments you’ll see below) to ensure you’re following all legal requirements. Regardless of where your business is located, employment law can be tricky. It’s always better to be safe than sorry.
When it comes to choosing the right time and place for an employee termination meeting, I’ve found that it’s best to have the conversation early in the week and early in the day. This gives the employee time to process the information and start their job search. Choose a private location where the conversation won’t be overheard. The last thing you want is for other employees to witness what should be a confidential conversation.
Get all necessary paperwork ready, including final paycheck information, benefits details, and any severance package offers. Also, plan for returning company property and revoking access to systems. Don’t do these things at the last minute.
Firing an employee can be very stressful, so I always recommend scripting your conversation, even a little bit. Obviously, you don’t want to sound robotic, but having a script can help you make sure that you don’t miss anything and maintain composure during what can be an emotional conversation. We’ll go over a sample script in the next section.
If you feel like you need an extra layer of protection for both you and the company when terminating an employee, I recommend getting a witness. You can get a manager or HR representative present during the termination meeting.
How to Fire an Employee: Script for The Termination Meeting
Now, let me walk you through the actual termination meeting. Below is a script that you can adapt to your specific situation. This goes without saying that this is just a guide. You’ll need to adjust this script based on your company’s policies and the specific circumstances of the termination.
Step 1: Start the Conversation.
Your opening should be direct and to the point. Avoid small talk or beating around the bush. In my experience, this only increases anxiety for everyone involved. Here’s how I might start:
“Thank you for coming in, [Employee Name]. I’ve asked [HR Rep/Manager Name] to join us for this conversation. I’m afraid I have some difficult news to share with you today. We’ve made the decision to terminate your employment with [Company Name], effective immediately.”
Step 2: Provide a Brief Explanation.
Keep this part brief and focus on the main reason for the employee termination. Avoid getting into a debate or lengthy discussion. Giving the reason for termination is not an opportunity for the employee to argue. You might say something like:
Micah Fysh, an employment lawyer at Littler LLP, says:
“When giving reasons for termination, less is more. In some cases, it may be better to simply say that the termination is on a without-cause basis and leave it at that. Everything said should be truthful and supportable with the records you’ve kept. If the employee tries to argue, tell them that the decision is final.”
Step 3: Address Logistics.
Cover the practical aspects of the termination. Be clear and concise:
“I know this is difficult news, and I want to walk you through what happens next. Today will be your last day at the office. [HR Rep Name] will guide you through the process of returning company property and collecting your personal belongings. Your final paycheck will include payment through today, plus [X weeks] of termination pay. Your health benefits will continue until [DATE]. You will receive a written termination letter today with the details”
Micah Fysh at Littler LLP says:
“Ensure that the employee is receiving all of their minimum statutory termination entitlements. In Ontario, that may include termination pay, severance pay, and benefit continuation for a minimum period of time.”
Step 4: Provide Resources and Support.
Offer any assistance your company provides for transitioning employees. I’ve found that this can go a long way in maintaining goodwill:
“We want to support you during this transition. We’re offering [X months] of outplacement services to help with your job search. Additionally, here’s information about filing for unemployment benefits. If you need a reference for future employment, please direct those requests to our HR department.”
Micah Fysh of Littler LLP says:
“Often, employers take this opportunity to also offer an enhanced severance package in return for a release of all claims against the company. This is an appropriate time to tell the employee of that offer. How large an offer to make will usually depend on the circumstances and the risk that the employee will make a claim.”
Step 5: Allow for Questions.
Give the employee a chance to ask questions, but be prepared to defer detailed questions to HR, and respond to any question about why the decision was made with firm but polite refusals to discuss those issues, bringing the topic back to the process moving forward:
“I know this is a lot to process. Do you have any immediate questions about what we’ve discussed? If you think of questions later, please don’t hesitate to reach out to [HR Contact].”
Step 6: Conclude the Employee Termination Meeting.
End the meeting on as positive a note as possible, while being genuine:
“[Employee Name], I want to thank you for your contributions to [Company Name] during your time here. While this is a difficult decision, I truly wish you the best in your future endeavors.”
Restructuring or Downsizing Employee Termination Script
Now, let me go over the termination meeting for a restructuring or downsizing scenario. Adjust it to your specific situation and company policies.
Step 1: Start the Conversation.
Begin the conversation directly. In my experience, it’s best to be straightforward:
“[Employee Name], thank you for meeting with me and [HR Rep Name] today. I’m afraid I have some challenging news to share. Due to recent company-wide changes, we’ve had to make some difficult decisions. I regret to inform you that your position has been eliminated as part of our restructuring efforts.”
Step 2: Explain the Situation.
Provide a brief, clear explanation focusing on the business reasons:
” Our company is undergoing significant changes to [reason, e.g., “adapt to market conditions” or “streamline operations”]. As a result, we’ve had to eliminate several positions, including yours. This was a tough business decision that affects multiple departments.”
Step 3: Outline the Next Steps.
Clearly communicate the practical aspects of the termination:
“Let me walk you through what happens next. [Date] will be your last day with us. [HR Rep Name] will assist you with returning company items and gathering your personal belongings. You’ll receive your final paycheck, including [X weeks] of termination pay. Your health coverage continues until [date]. You will receive a written termination letter today with the details.”
Step 4: Offer Transition Support.
Describe the resources available to the employee:
“We’re committed to supporting you through this transition. Our company is providing [X months] of outplacement services to aid your job search. We’ve prepared information on filing for unemployment benefits. Additionally, we’re happy to serve as a reference for your future employment opportunities.”
Step 5: Address Questions.
Allow time for the employee to process and ask questions:
“I understand this is a lot to take in. Do you have any questions about what I’ve shared? If you think of anything later, please don’t hesitate to contact [HR Contact Name]. We’re here to help make this transition as smooth as possible for you.”
Step 6: Conclude the Employee Termination Meeting.
End the meeting on a note of appreciation and support:
“[Employee Name], I sincerely appreciate your contributions to our team. Your work has been valuable, and I’m confident you’ll bring great skills to your next role. If there’s anything else we can do to assist you during this transition, please let us know. We wish you the very best in your future endeavors.”
After the Employee Termination Meeting
You’re not done once the termination meeting is over. I’ve found that how you handle the aftermath is just as important as the termination itself.
First, provide the employee with a written termination letter setting out the information given at the meeting, including what termination pay and benefit continuation they will receive. If the employee will be offered an enhanced severance package in return for a release, give them a letter and release setting out the terms of that offer.
Then, you really need to communicate with your team about the departure promptly to prevent rumors and speculation. Be respectful of the departed employee’s privacy while being as transparent as possible about how their responsibilities will be handled moving forward. I’ve seen many situations where lack of communication led to unnecessary anxiety among the remaining team members.
Next, assess the terminated employee’s responsibilities and decide how to redistribute their work. Ideally, you want to do it before terminating an employee.
Don’t forget to secure company assets and information. Ensure all company property is returned and access to systems and data is revoked promptly. You want to protect your company’s intellectual property and sensitive information.
Lastly, but perhaps most importantly, support your remaining team members. Most often than not, your team will feel unsettled after a termination. Make yourself available for questions. I’ve found that being present and transparent during this time can actually strengthen team bonds and trust in leadership.
Best Practices and Mistakes to Avoid When Terminating an Employee
Over the years, I’ve learned a few key lessons about terminations that I’d like to share with you.
When it comes to best practices, I firmly believe in being direct and honest. Clarity is kindness. Don’t sugarcoat the situation or leave room for misinterpretation. At the same time, show empathy. Remember, you’re dealing with a person’s livelihood. Be professional, but also human.
Always keep the termination process private. Do the employee termination meeting in a private space and maintain confidentiality about the details. This protects both the employee and the company.
I can’t stress enough how important it is to come prepared. Have all necessary documents and information ready. The more prepared you are, the smoother the process will be. And don’t forget to follow up with your team after the termination to ensure a smooth transition.
Now, let’s talk about some common mistakes that I’ve seen over the years business owners make when terminating employees. One of the biggest is procrastination. I know it’s tempting to put off a difficult conversation, but in my experience, delaying a necessary termination often makes the situation worse for everyone involved.
Another mistake I’ve seen leaders make is getting personal. Stick to job-related issues! Avoid personal attacks or emotional arguments. This not only maintains professionalism but also protects you and your company legally.
A lack of documentation is another common mistake. Always have a clear paper trail of performance issues, warnings, and improvement attempts. I’ve seen many many companies get into legal trouble because they didn’t have proper documentation.
Inconsistency in termination practices can also be problematic. You want to make sure your employee termination practices are consistent across your organization to avoid claims of discrimination. This is where having clear company policies and procedures can really save you.
And lastly, avoid allowing negotiations during the termination meeting. The decision should be final when you call the termination meeting. I’ve seen situations where business owners and managers got pulled into negotiations. Honestly, it never ends well.
The “Keeper Test” and Performance Management
I mentioned Netflix’s “Keeper Test” earlier, and I think it’s worth expanding on this concept. The idea is to regularly ask yourself, “Would I fight to keep this employee if they were leaving for a similar role elsewhere?” This approach encourages managers to consistently evaluate employee performance and fit.
However, I’ve also learned that it’s crucial to pair this with solid performance management practices. Don’t wait for annual reviews. Provide constructive feedback to all employees. I’ve found that regular check-ins can prevent many issues from escalating to the point of termination.
Make sure every team member understands what success looks like in their role. Clear expectations are key to fair performance management. I’ve seen many situations where misaligned expectations led to unnecessary conflicts.
Offer chances for skill development and growth. Sometimes, an employee who’s struggling in one role might excel in another. I remember a situation where we had an underperforming sales rep who turned out to be an excellent project manager. Don’t be afraid to think creatively about how to take advantage of your team’s talents.
Before jumping to employee termination, consider whether a structured Performance Improvement Plan (PIP) could help the employee get back on track. I’ve seen PIPs work great when implemented correctly.
Lastly, keep clear records of all performance discussions, feedback, and improvement efforts. This documentation is crucial not only for legal protection but also for ensuring fair and consistent treatment of all employees.
Final Thoughts
Terminating an employee is never easy, but doing it the right way is crucial for your business, your team, and the employee themselves. As leaders, it’s our responsibility to make tough decisions and handle them with professionalism, empathy, and integrity.
Your goal is not just to remove an underperforming employee. You want to do so in a way that:
- protects your company legally and reputationally
- maintains the respect of the terminated employee
- preserves team morale and company culture
- provides an opportunity for the company improvement
At The Linkus Group, we’ve seen how proper handling of terminations can actually strengthen a company in the long run. It shows to your team that you’re committed to maintaining high standards while also treating people with respect.
Leadership isn’t about making only the easy, popular decisions. It’s about making the right decisions, even when they’re difficult.
Navigating employee terminations can be challenging, but you don’t have to do it alone. At The Linkus Group, we specialize in supporting companies with all aspects of HR and recruitment, including handling sensitive situations like terminations. Our expertise can help you manage these processes professionally and compassionately, protecting both your company and your employees.
If you need personalized advice on handling sensitive HR situations, improving your recruitment strategies, or building high-performing teams, connect with me on LinkedIn.
FAQs
How do I handle an employee termination meeting when the employee becomes emotional or angry?
During an employee termination meeting, remain calm and professional. Listen actively, show empathy, and stick to the script. If the employee becomes overly emotional or hostile, consider pausing the meeting briefly. Ensure an HR representative or other witness is present, protecting against potential legal claims. In extreme cases, end the meeting early, and tell the employee that they will receive a written termination letter setting out all of the details of their termination.
What should I include in a termination letter for an employee?
A termination letter should include the employee’s name, position, effective date of termination, reason for termination, details about final pay and benefits, information on returning company property, and any severance package offered. Keep the tone professional and factual. Consult with legal counsel to ensure compliance with employment laws.
How can I protect my company’s reputation during and after an employee termination?
To protect your company’s reputation, handle the termination process professionally and discreetly. Communicate clearly with remaining team members about the change without divulging personal details. Offer support to the terminated employee, such as job placement assistance. Maintain a consistent process for all terminations to avoid claims of discrimination.
What are the legal risks of terminating an employee, and how can I mitigate them?
Legal risks include wrongful termination lawsuits, discrimination claims, and breach of contract allegations. Mitigate these by documenting performance issues, following company policies consistently, adhering to employment laws, and consulting with legal counsel before termination. Ensure the termination process is fair and well-documented.
How do I handle termination in cases of sexual harassment or other serious misconduct?
In cases of sexual harassment or serious misconduct, act swiftly and decisively. Follow your company’s anti-harassment, anti-violence, or other relevant policy and conduct a thorough investigation. Document all findings and actions taken. Consider immediate dismissal if warranted. Consult with legal counsel to ensure proper handling and protect against potential legal issues.
