Termination

Termination Letter

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

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 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.

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.

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.

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.

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.

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 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.