HR must ensure the employee termination process is fair and legally compliant, coordinate offboarding tasks, support managers during difficult conversations.

What is employee termination?

Employee termination refers to the formal end of a worker’s tenure at a company. There are typically two types of employee termination: voluntary termination (when the employee chooses to resign or retire) and involuntary termination (when the employer ends the contract due to reasons like poor performance, misconduct, or restructuring).

HR must ensure the employee termination process is fair and legally compliant, coordinate offboarding tasks, support managers during difficult conversations, and keep track of all relevant documentation (e.g., warning letters and final payslips).

It’s a sensitive process, and getting it wrong can be expensive — unlawful terminations can result in employers paying between $50,000 and $250,000 in legal fees and settlements. A clear termination policy and a reliable employee termination checklist can help your organization avoid such issues.

Why is termination sometimes necessary?

Some of the most common reasons for termination are poor job performance, employee misconduct, redundancy or restructuring, budget cuts, or the end of a contract.

For instance, when an employee repeatedly fails to meet expectations even after receiving clear feedback and sufficient support, termination may be the only option left to prevent issues for the team and company.

Additionally, behavior like harassment, theft, or breaking company rules can lead to immediate termination. However, this also requires thorough investigation and detailed documentation to protect everyone involved.

Business restructuring often leads to certain roles becoming redundant and, therefore, to employee terminations. Budget cuts may also be part of a restructuring or the result of financial constraints. In such cases, employees in support roles, roles that don’t generate revenue (e.g., HR, IT, or administration), or highly paid positions are likely to be terminated.

Factors that impact employee termination

Here are some factors to consider when handling employee terminations:

• Legal rules: Local labor laws cover notice periods, final pay, valid reasons for termination, and more. Stay updated on these rules and regulations to protect your company from potential legal consequences.
• Type of contract: Each worker’s employment contract affects how you should handle their termination. Full-time and part-time employees usually have different rights compared to freelancers or those on fixed-term contracts.
• Union or collective agreements: If a union or collective agreement covers an employee, you may have to follow extra steps or adhere to protections in addition to labor laws and company policy.
• Company policies and practices: Internal termination policies and practices must be consistent to ensure fairness for all employees. This helps build trust, ensure respect, and protect the employer brand.
• Discrimination risks: Make sure each reason for termination is based on documented facts, not protected traits like age, gender, ethnicity, sexual orientation, or disability. This prevents accusations of discrimination.

What is an employee termination checklist?

An employee termination checklist is a simple tool for managing the process of ending someone’s employment in a clear, organized way. It’s a step-by-step list that covers all the necessary actions and details, from paperwork and legal requirements to communication and recovering company property.

An effective checklist should account for relevant documentation, a clear communication plan for HR, the employee, and their supervisor, legal compliance, asset recovery, and system access removal.

What to include in an employee termination checklist

Whether you’re building your own employee termination checklist or using a template, here are the key elements your checklist should include:

Pre-termination

Before the termination meeting, make sure you’ve completed these steps:

• ✔ Review the employee’s contract and personnel file: Pay close attention to any clauses related to notice periods, severance, or other obligations.
• ✔ Confirm legal and policy compliance: Ensure you follow both local labor laws and your company’s internal policies to avoid potential disputes.
• ✔ Notify IT and security: Inform them in advance about the termination so they can prepare to restrict access and recover company equipment when necessary.
• ✔ Schedule the termination meeting: Agree on a time and date with HR, the employee, and their manager before scheduling the meeting.

Day of termination

On the official termination date, observe the following process:

• ✔ Hold the termination meeting: The employee, their manager, and HR must be present, with the latter two to explain the decision clearly and respectfully.
• ✔ Provide the termination letter: Issue the employee a written notice that details the reason for termination, their last working day, and any relevant entitlements.
• ✔ Explain next steps: Relay important details like the amount and date of the employee’s final salary, any benefits, and the return of company equipment.
• ✔ Collect company property: Retrieve items such as ID badges, laptops, phones, access cards, or uniforms.

Post-termination

After the employee leaves, wrap up the following final tasks:

• ✔ Disable system access: Remove the employee’s access to their work email, internal systems, and any relevant software to protect company data.
• ✔ Process final payments: Issue the last paycheck, pay out any unused leave, and confirm any deductions or severance.
• ✔ Update HR systems: Mark the employee as terminated in your HRIS and update internal payroll and benefits records.
• ✔ Conduct an exit interview: If appropriate, gather feedback from them on their employee experience to help improve onboarding changes or retention strategies.
• ✔ File all documentation: Store all documents related to the termination securely on your company’s internal database for compliance purposes and future reference.

Why use an employee termination checklist template?

An employee termination checklist template can help ensure a smooth, compliant employee termination procedure. Here’s why you should use one:

Save time and ensure consistency

A ready-to-use template gives you a reliable process to follow each time an employee leaves. It saves time by laying out all the required steps and helps ensure you manage terminations the same way across all departments and teams.

Minimize the risk of wrongful termination claims

A template prompts you to document everything and follow all necessary legal and internal steps. This reduces the chance of skipping something important and, as such, helps protect your company if an employee ever challenges their termination.

Adaptable to different types of terminations

Whether an employee termination is voluntary, involuntary, or simply happening at the end of a contract, you can easily adjust a good employee termination checklist template to suit the situation. This can also aid in maintaining compliance with local labor laws.

Make training new HR staff easier

An employee termination checklist template can be a helpful training tool for new HR hires. New HR team members can follow it step by step and gain confidence in their roles by completing each part of the process correctly.

Free employee termination checklist template

To help you manage the termination process more smoothly and consistently, AIHR has developed a free, customizable employee termination checklist template. You can adapt it to fit your company’s policies, local labor laws, and specific employee termination procedures. 

Employee Termination Checklist