Termination Process: Required Steps and HR Procedures for an Effective Termination

Employee terminations are never easy, comfortable, or pleasant and require time and consideration to get right and be performed in a compassionate manner. But if this process is sloppy, unstructured, or unstandardized, employers run the risk of disgruntled employees, tarnished company reputations, uncomfortable conversations, or — worse — legal consequences. 

While the termination process will never not be an uncomfortable experience, here’s what you can do to make this unpleasant process slightly better.

What is the termination process? 

The termination process refers to the steps and procedures employers must complete to formally terminate an employee. This process is time-sensitive and usually involves collaboration between various departments and teams, such as IT, HR, managers, payroll, and benefits, so communication and centralization of important information is necessary. 

Employee terminations can be a result of consistent poor performance, repeated violations of company policies or codes of employee conduct, or company restructuring or downsizing.

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When does the termination process happen?

There are typically steps that companies take before an employee is terminated, which includes: 

• Reviewing the expectations established during their onboarding 
• Having candid conversations with the employee
• Coaching the employee through steps to improvement
• Placing employees on performance improvement plans (or PIPs)
• Setting goals to help motivate the employee

If after all of this the employee doesn’t improve or fails to meet goals outlined in their PIP, then an employer will begin the official termination process by letting the employee know of the company’s decision and why they decided to end their employment. 

However, while this is just one example of when and how the termination process can happen, it’s not always the case. Depending on where you live, some employers may have the right to terminate employees at any time and without reason or cause. This is known as at-will employment. To avoid any confusion, details like this should be discussed with employees and outlined clearly in the employee handbook or manual.

The importance of a structured termination policy and procedures 

The primary benefits of a structured and standardized termination policy is to protect employers from possible legal issues or liability. For example, depending on the employee hiring contract or state labor laws, terminating an employee without cause or reason may be grounds for a lawsuit against the employer.

In addition to legal aspects of termination, termination procedures ensure that companies address another type of risk: retaliatory employee misconduct. Terminating an employee is an emotional process, and one that terminated employees may not respond well to. After all, who wants to hear that they’re getting fired? 

Clear termination policies and procedures ensure that there’s no misuse of internal or confidential information, safeguards intellectual property, and prevents theft of property like computers or equipment provided by the company. 

With a termination policy established, compliance with labor laws is ensured and employers can provide employees transparency into performance and disciplinary actions that can be taken.  

Employee termination process steps and checklist 

While this process will be customized to meet certain business needs, state labor laws, or industry requirements or regulations, below is a framework of the termination process and steps that need to be taken depending on the reason for termination.

Termination process due to poor performance or conduct

Step 1: Identify and begin to document performance or conduct issues 

Documentation is a critical aspect of the termination process. Whether it’s performance reviews, manager notes, or team feedback, poor performance or conduct must be documented the moment it’s noticed and every instance that it occurs. In addition to documenting patterns, be sure to also keep note of any corrective conversations that have been had with the employee. 

Step 2: Alert employees of the issues

Employees should be made aware of any actions or performance-related issues, especially if it’s an easily fixable issue or concern. Refer employees to the employee handbook or manual to remind them of the company policy or code of conduct. 

This formal notice and/or warning should also be documented, as well as the date that the employee was given notice. 

Step 2a: For performance issues, place employees on a performance improvement plan (or PIP) and coach them on how to improve

Employers may offer employees a chance to improve if they believe the employee is capable of learning and growing. For performance-related issues, employees may be put on a PIP, or performance improvement plan. This plan is a formal agreement between the employee and the manager to learn, improve, and hit certain milestones to practice accountability.

Managers will typically work with the employee to establish an improvement plan, goals to reach, and motivate them in addition to holding them accountable. If no changes are made in either performance or conduct and it’s in the company’s best interest to let the employee go, then the formal termination process will begin. 

Step 3: If termination is necessary, connect with HR, IT, and payroll sort out administrative details

Begin by drafting an official letter of termination which includes the reason for termination and the last day of employment to help HR, IT, and payroll departments navigate the upcoming changes that need to be made. This includes details surrounding: 

• Company policy. Even if the state follows at-will employment laws, it’s best practice to provide a reason for termination that aligns with company policy so that the process is transparent for all parties involved. 
• Benefits. Employees should be made aware of how benefits like insurance, stocks, unused vacation time, retirement plans, etc. will be impacted by their termination. 
• Final paycheck amount and disbursement.
• Equipment. If employees are remote, shipping labels will need to be provided.
• Access to software, programs, or internal communication. To protect IP, companies can schedule an automated lock-out so employees can’t access company files. 

This information needs to be included in the termination paperwork provided to the employee during their termination meeting, so timely and accurate responses are crucial to ensure a smooth transition for both parties.

Step 4: Plan the termination meeting with employee

As this information is being sorted out, schedule a time to speak with the employee being dismissed. Be sure to include any additional parties involved. It’s recommended that a representative from the HR or People Ops team be present with the employee’s manager to help sort through the logistics and answer any questions the employee may have regarding their benefits or pay.

Step 5: Finalize paperwork and plan next steps

In addition to finalizing the exit paperwork, managers should begin to gauge what the employee is responsible for and ongoing projects they’re a part of to determine the best way to handoff, take over, or distribute tasks. 

If the plan is to hire a replacement, now is the time to begin drafting a job description and determine the qualifications and qualities of the ideal candidate. Create a strategic recruiting process with this comprehensive guide to attract top talent. Or, if you’re considering sourcing candidates from the existing talent pool, here’s what you need to know about internal recruitment and internal mobility.

Step 6: Meet with the employee and instruct them on next steps

Terminations aren’t easy, and it’s important to consider how the terminated employee may be feeling. Some may feel surprised by the news, some not so much. No matter the reaction, to ensure that the meeting and dismissal is amicable, it’s best to keep the meeting focused and to the point.

Thank the employee(s) for their work, and list the reasons for termination so that it’s clear why the decision was made. Walk them through:

• The timeline for their dismissal. Terminated employees will usually be dismissed immediately, but some employers may allow employees to come back outside working hours to clear their workspace. Whatever the decision is, let the employee know.
• Their benefits (whether they’ll be terminated effective immediately or whether the company will provide extended benefits).
• When they can expect their final paycheck and what will be reflected in that amount (for example, unused vacation).
• The logistics of returning their equipment (if they work remotely), or packing their belongings and returning key cards (if they’re hybrid or in-office). 

If the employee feels comfortable and willing, consider asking them if they’re available for an exit interview or survey. If they say no, respect their wishes and proceed with the termination.

Step 7: Revoke access, secure confidential information, and collect company property

Before an employee leaves, access to the workplace — both physical and electronic — must be disconnected or deactivated. The IT department is usually responsible for deactivating computer access. It’s also common for managers to gain access to the terminated employee’s computer to sort through and collect files owned by the former employee.

Because terminations are time-sensitive, coordinate with the IT team to determine when employee access should be revoked and when/how equipment should be collected. 

Step 8: Communicate with remaining staff

The final step in the termination process is letting the former employee’s coworkers know about their dismissal. Depending on the nature of the termination, it may be best to draft an official statement so that employees are informed of the situation without leaking any information that may be confidential or sensitive.

Termination process due to company restructuring and downsizing

This type of termination will follow many similar steps as the performance- or conduct-based terminations (such as finalizing paperwork, collecting equipment, updating account access, and notifying remaining employees), but a few steps are necessarily different. 

Review laws and regulations surrounding employee termination notice

Employer’s should work with legal or HR teams to confirm their state’s labor laws to determine whether they’re required to provide some form of employee notice and what that window of time is. 

Plan the termination(s) in a compassionate manner

Employees may feel shocked, stunned, or surprised by the termination, so it’s important to navigate this meeting with honesty and compassion. 

Pick a time and day that is considerate and choose a forum that won’t feel desensitized to the situation or cruel. For example, don’t wait until employees have put in a full day of work to let them know that it’s their last day. Failing to handle the situation in a compassionate manner can negatively impact brand reputation and employee morale.

Best practices for employee termination and what to avoid doing

Do: Be respectful

No matter the reason for termination, employees should be treated with respect and the termination meeting should be handled in a professional manner.

Don’t: Be ambiguous

Be direct with the reason you’re meeting with the employee(s) and why the decision was made. By the end of the meeting, the termination should be clear, as well as the next steps.

Do: Allow them to ask questions

Tying back to being respectful, allow employees to ask questions. By the time you meet with the employee(s), the termination paperwork should be completed and benefits, as well as final paycheck, should be sorted out. 

Don’t: Rush through or overextend the termination meeting

Meetings should be focused but not brief. Similarly, avoid dragging out the conversation or filling time with information that isn’t relevant to the termination. Consider creating a checklist so that managers leading the conversation know exactly what to discuss. 

Do: Meet with employees face-to-face (in-person or virtually) 

Laddering back up to respect, never terminate an employee over the phone or — if you’re doing it virtually — with your camera off. Employees should feel as though their time at the company was valued, which is why this small gesture matters. 

Don’t: Gossip 

Avoid discussing the termination with other employees in a disrespectful manner. Not only is this bad practice, but it could be grounds for breaching company confidentiality, privacy policies, or protected employee rights.

Do: Provide or offer outplacement services and support 

Whether the employee is being terminated for performance reasons or being let go as part of a larger restructuring, offering support during this time of transition — whether it’s mentorship, legal counsel, resume assistance, adding them to your professional network, or training — is a great way to help them settle during this transition and time of uncertainty.