Termination

"You are fired!" is a phrase we (or at least most of us) never want to hear. Although the delivery is typically less aggressive, the reality is that termination of employment is something human resource personnel might face during their day-to-day tasks. Termination can be uncomfortable for both the employer and the employee. It is important to establish respectful and effective processes and expectations to ease this discomfort. Interested to find out what these processes are? Read along to become an expert on how to (legally) fire employees.  

Termination Termination

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Table of contents

    Termination of Employment

    We often use the terms "termination of employment," "getting fired," and "getting laid off" interchangeably. However, it is essential to note the slight difference between the three expressions.1

    Layoffs imply strategic and structural changes within the company. For example, employees are laid off if the company is downsizing, relocating, or exiting a certain market.

    When someone gets fired, it implies they are being terminated due to their performance or behavior at the workplace. For example, poor performance, misconduct, or harassment can lead to an employee getting fired.

    As a result, termination is a general term that encompasses layoffs and firing (see Figure 1 below).

    Termination Letter

    When an organization decides to terminate someone's employment, the employee receives a termination letter.

    A termination letter is a formal letter that outlines the employee's termination process.

    The termination letter outlines the following information:

    • The reason for the employee's dismissal (e.g., poor performance or absenteeism),

    • The final date of employment,

    • Any compensation the employee is entitled to (e.g., the employee might be entitled to receive a salary for a few months after termination, or they may still have access to private health insurance),

    • Any items or company property they must return (e.g., work phone or laptop),

    • A reminder of any non-disclosure agreements (NDAs) or other contractual obligations the employee must continue to adhere to after termination,

    • The human resources (HR) department's contact information in case the employee has any questions or concerns or would like to appeal the company's termination decision.

    Termination Agreement

    Another document involved in the termination of employment is the termination agreement.

    The termination agreement is a formal document that signifies the contract's termination.

    The document records that both parties agree to terminate the contract of employment. An organization may use a termination agreement when dismissing an employee. However, employees may also encounter a termination agreement when they resign from their current roles.

    Resignation is when an employee declares that they are leaving their current job.

    Employees are usually required to give either verbal or written notice to their employer about their resignation. The employee can find their resignation period, or notice period, in their contract.

    The notice period specified in the contract states the number of weeks or months an employee legally has to continue working after they have informed their employer that they are leaving the organization, i.e., after they have handed in their resignation.

    Types of Termination

    Although termination can be an unpleasant task for human resource personnel, terminations are sometimes necessary. In other instances, termination might be natural and positive, for example, when an employee has reached retirement age. So let's take a look at the different types of termination (see Figure 2 below); they are as follows:

    • Restructuring - An employee's contract might have to be terminated if the organization is restructuring. For example, suppose the company is downsizing and shutting down a production unit or an office in a particular country. In that case, some employees might get the chance to be relocated, but others might face termination.

    • Redundancy - Certain roles may become redundant due to changes in the internal and external business environment. Redundancy means that the organization no longer requires anyone to fill a particular role as the role does not exist anymore. For example, introducing artificial intelligence (AI) could make certain customer service or factory roles redundant.

    • Retirement - Employees may wish to retire when they reach the compulsory retirement age. For example, the retirement age in the European Union (EU) is 65, and in the UK and USA, it is 66. However, many countries plan to adjust the retirement age in the future due to higher life expectancy. HR managers for global firms must also remember that the retirement age varies between different countries.

    • Medical concerns - At times, employees might encounter severe medical issues that might prevent them from undertaking their roles or responsibilities per the guidance of an accredited medical board. Employees are legally entitled to sick leave in most countries; however, if the medical issue is life-altering, where they may never be able to work again, termination can be an outcome.

    • Disciplinary procedure - Sometimes, an organization must terminate an employee's contract due to disciplinary reasons. For example, if the employee fails to show up for work, does not complete the tasks assigned to them, harasses other employees, etc., the organization might terminate their contract if they fail to change their behavior.

    Sometimes an employee is only employed by the organization for a set number of months or years. Fixed-term contracts (FTC) or other contractual agreements usually have a deadline. If the employer does not require the contractor's services anymore, rather than being terminated or laid off, the contract simply expires.

    Termination Reasons

    At times, an employee might be fired or terminated due to unwanted behavior. Unwanted behavior generally falls into one of three categories:

    1. Performance-related issues,

    2. Misconduct,

    3. Violation of organizational rules.2

    The organization conducts a disciplinary procedure when an employee engages in unwanted behavior.

    Disciplinary action is the process of confronting and/or punishing an employee for violating the terms of their contract and the organization's rules.

    Examples of unwanted behavior include but are not limited to the following:

    • Absenteeism

    • Sexual harassment

    • Aggression or bullying others

    • Discrimination (e.g., sexism or racism),

    • Poor performance,

    • Misconduct (e.g., theft, insider trading, etc.).

    The organization will often conduct an investigation around the unwanted behaviors and turn to various disciplinary action procedures depending on the severity of the situation.

    For example, if the employee is frequently absent from work, the organization might give the employee a formal verbal or written warning. If the employee fails to change their behavior, the result might be termination. Similarly, if someone performs poorly at their workplace, the organization might retrain the employee or provide them with a temporary pay cut. For more severe situations, for instance, if the employee steals from their organization, the organization might report the employee to the police, and termination might be the only option.

    The Risks of Termination

    In the event of unfair dismissal, the company faces a new set of challenges. Unfair dismissal is one of the most significant risks of termination.

    Unfair dismissal is when an employer does not have a valid reason to fire an employee yet still dismisses them.

    Examples of unfair dismissal include getting fired during maternity or paternity leave, because you needed to take time off for jury duty, or because you tried to expose the organization for misconduct.3

    Constructive dismissal is when an employee is forced to leave their workplace due to misconduct on behalf of the employer.

    Constructive dismissal may occur, for instance, when an employee is getting paid less for no reason or is being harassed by other employees without the organization doing much about it.

    In some instances, the employee might decide to take legal action if the organization dismissed them wrongfully. For example, the employee might pursue a discrimination lawsuit against the organization. Additionally, the organization might be at risk if the terminated employee has access to insider information about the company, especially regarding misconduct.

    These procedures can cost the organization a lot of money in legal fees, penalties, and compensation. It also takes a lot of time to complete these processes and can damage the image or reputation of the organization in the long term, which might deter other candidates from applying or even continuing their roles at the company. Therefore, organizations must establish effective human resource processes and management training to avoid the risks of termination.

    Termination Without Cause

    In some instances, an employer is allowed to dismiss an employee without cause. For example, in the United Kingdom, an employer is permitted to terminate employment if an employee has less than two years of continuous service with their employer, provided the employee is being dismissed for just reasons.4

    Similarly, in the US, an employer can fire an employee without notice if the two parties have an "at-will employment" arrangement. This agreement states that both the employer and the employee have the right to terminate the relationship without notice or cause, provided that they are not doing so for an illegal reason. For example, it is illegal for employers to dismiss an employee due to their sex, age, race, religion, pregnancy, or sexual orientation.5

    Termination - Key takeaways

    • Layoffs imply strategic and structural changes within the company.
    • When someone gets fired, it implies they are being terminated due to their performance or behavior at the workplace.
    • Termination is a general term that encompasses layoffs and firing.
    • A termination letter is a formal letter that outlines the employee's termination process.
    • The termination agreement is a formal document that signifies the contract's termination.
    • Resignation is when an employee declares that they are leaving their current job.
    • Restructuring, redundancy, retirement, medical concerns, and disciplinary action are the types of termination.
    • Disciplinary action is the process of confronting and/or punishing an employee for violating the terms of their contract and the organization's rules.

    References

    1. Joblist. Laid Off vs. Fired vs. Terminated: Differences & What to Do. 2022. https://www.joblist.com/guides/guide-to-layoffs-vs-firing-termination
    2. BambooHR. An HR Glossary for HR Terms. 2022. https://www.bamboohr.com/hr-glossary/disciplinary-action/
    3. GOV.UK. Dismissal: your rights. 2022. https://www.gov.uk/dismissal/unfair-and-constructive-dismissal
    4. Hannah Johnson. Can you be dismissed from work for no reason?. 2020. https://www.ellisjones.co.uk/news/dismissed-from-work-for-no-reason/
    5. Foothold America. Employing a US worker. 2022. https://www.footholdamerica.com/faqs/firing-without-notice/
    Frequently Asked Questions about Termination

    What do you mean of termination? 

    Termination is a general term that encompasses both firing and layoffs.  

    Is termination and fired the same? 

    We often use the terms "termination of employment," "getting fired," and "getting laid off" interchangeably. However, it is essential to note the slight difference between the three expressions. Layoffs imply strategic and structural changes within the company. When someone gets fired, it implies they are being terminated due to their performance or behavior at the workplace. Therefore, termination is a general term for both layoffs and firing.  

    What is an example of termination? 

    An employee's contract might have to be terminated if the organization is restructuring. For example, suppose the company is downsizing and shutting down a production unit or an office in a particular country. In that case, some employees might get the chance to be relocated, but others might face termination.  

    What are the types of termination? 

    Restructuring, redundancy, retirement, medical concerns, and disciplinary action are the types of termination. 

    What are the reason for termination? 

    The general reasons for termination are either strategic (e.g., restructuring) or unwanted behavior. Unwanted behavior generally falls into one of three categories: 

    1. Performance-related issues, 
    2. Misconduct, 
    3. Violation of organizational rules

    What is the importance of termination? 

    Although termination can be an unpleasant task for human resource personnel, terminations are sometimes necessary when the employee engages in unwanted behavior. In other instances, termination might be natural and positive, for example, when an employee has reached retirement age. 

    Test your knowledge with multiple choice flashcards

    ________ imply strategic and structural changes within the company. For example, employees are laid off if the company is downsizing, relocating, or exiting a certain market. 

    The termination agreement is a formal document that signifies the contract's termination.

    Termination agreements are only necessary when an employee is fired.

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