What Is Employment Separation? (Definition and Types)

By Indeed Editorial Team

Published July 7, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

There comes a time when every employment arrangement must come to an end. Understanding the different types of employment separation is important because it may determine whether the employee receives unemployment benefits or severance pay. Whether you have recently experienced employment separation from the company you work for or you need to let one of your employees go, you may benefit from learning more about employment separation. In this article, we explain what employment separation is, list different types of employment separation and explore some of the most common reasons an employee may leave a company.

Related: How To Make an Employee Departure Announcement

What is employment separation?

Employment separation refers to the end of an employee's working relationship with a company. This can happen when an employment contract or an at-will agreement between an employer and an employee ends. While sometimes the employer makes the decision to terminate employment, an employee may also initiate a voluntary employment separation if they wish to retire or resign.

Related: Guide to Severance Pay

Types of employment separation

There are many ways for an employee or an employer to discontinue their working relationship. While some types of employment separation may be initiated by the employee and others by the employer, each circumstance is unique. Understanding what each type of employment separation is can help you make the appropriate arrangements for your company or your career. Here is a list of different types of employment separation:


One of the most popular ways to pursue employment separation is through termination. There are several types of employment separation that fall under this category that may provide guidance to employers or employees seeking a change. Here are some common types of termination:

  • Constructive discharge: There are some work environments that employees may find challenging, even after they have attempted to improve their situation multiple times. In these instances, the employee can choose to leave the company through a constructive discharge, which can benefit them by offering them some of the same rights as a discharged worker if their case for leaving is strong enough.

  • Layoff: When a layoff occurs, an employee is let go through no fault of their own due to changing business needs, such as an acquisition or restructuring of departments. Future employers usually view being laid off more favorably than being let go for other reasons, and employees who are laid off may receive extended benefits and job search assistance to help them pursue a new career path they enjoy.

  • Termination by mutual agreement: A termination by mutual agreement occurs when both the employee and the employer agree to a separation. This type of arrangement can benefit both parties by giving the employer time to hire someone new and the employee an opportunity to plan for the next phase of their career.

  • Involuntary termination: An involuntary termination takes place when an employer chooses to let go of an employee. The reasons for an involuntary termination can vary, but typically the employee is still willing and able to work, which can make it easier for them to find employment elsewhere.

  • Voluntary termination: A voluntary termination takes place when an employee leaves a company of their own free will. For example, an employee may pursue voluntary termination when they accept a job offer with another company or when they decide to retire from their role.

  • Temporary job or employment contract ends: If an employee is working with a company through a temporary job or a contract, the company may let them go when their agreement ends. Both parties are aware of the final date of employment in these situations, which often allows them to part on good terms and provides the potential to work together again in the future.

  • Fired: Sometimes an employee and an employer aren't a great match. An employer may choose to fire an employee in these cases so both parties can pursue other opportunities that align with their interests and goals.

  • Termination for a cause: If an employee is terminated for a cause, the employer lets them go for a specific reason. While this news may be challenging to news to receive, an employee who understands why they were terminated may accept this as a learning experience and use the employer's feedback to improve themselves professionally.

  • Termination with prejudice: An employer may choose to terminate an employee with prejudice if they don't plan to hire the employee for the same job again in the future. While this may also be challenging news to receive, it provides both the employee and the employer with clarity and a fresh start.

  • Termination without prejudice: If an employee is terminated without prejudice it means they may be eligible to be rehired by the company in the future. This type of termination typically occurs when an employee is let go for reasons other than their performance and gives them the opportunity to apply for jobs with the company again later in their career if they wish to do so.

  • Wrongful termination: Wrongful termination occurs when an employer dismisses an employee unlawfully. Since there are laws that exist to protect employees, the employee may be able to receive compensation if they have a strong enough case, which can help them move forward with their career.

Related: How To Explain a Termination at an Interview (With Tips and Examples)


Many people see resigning from a job as a professional and courteous way to pursue employment separation, which can help employees discuss their departure from a company with future employers while maintaining a positive demeanor. The most common types of resignation include:

  • Voluntary resignation: A voluntary resignation happens when an employee chooses to leave a company for their own benefit. Employees typically provide their employer with at least two weeks' notice to make arrangements before they leave, which can make the transition easier for both parties.

  • Forced resignation: There are some challenging situations where an employer may ask an employee to resign or else the company must let them go. This option gives employees the opportunity to leave their current role without being terminated, which can work favorably for them when it's time to find a new job.

Read more: Q&A: What Does "Resign" Mean and How Does It Work?


As an employee nears the end of their career, retirement is often a popular topic of discussion. While many employees look forward to this milestone, there are several reasons they may retire from their current position, including age, health, finances and personal preferences. Here are some of the most common types of retirement:

  • Voluntary retirement: For many professionals, the end goal in their career is to retire. When you reach this exciting milestone, you may go through the process of resigning from your company voluntarily.

  • Phased retirement: Companies may implement a phased retirement plan for employees who are older. This can help both parties adjust by slowly reducing the employee's work hours prior to their official retirement date.

  • Mandatory retirement: An employer may implement a mandatory retirement to encourage an older employee to retire for a variety of reasons. This can provide employees with the opportunity to pursue other interests outside of work and allow the company to train someone new to fill their role.

Related: How To Write a Retirement Letter: Tips and Example


A furlough refers to a temporary unpaid leave from a job. While the company still technically employs the employee at this time, individuals who are under furlough may be eligible to receive unemployment benefits and health insurance. Companies may implement a furlough instead of laying employees off to save money while retaining talent for the future. This allows employees to return to their job roles in the future and continue their work as usual instead of searching for employment elsewhere.

Read more: What Is a Furlough? How It Works and How Long It Can Last

Reasons for employment separation

Here are some of the most common reasons for employment separation:

  • Employee performance: An employer may choose to let go of an employee if their work expectations don't align with each other. In these cases, the employee may be better suited for a different type of work or find success with another company.

  • New job opportunity: An employee may accept a new job opportunity to help them reach their personal, professional or career goals. Employees can usually leave on good terms with their current employer if they provide at least two weeks' notice for them to hire a replacement.

  • Finances: An employer may choose to furlough or lay off employees to save money so they can sustain their company long term. An employee may also seek employment separation for financial reasons if another company offers them a position with a better salary or benefits.

  • Retirement: As employees get older, they may choose to retire so they can spend more time pursuing their interests outside of work. Retirement is often mutually beneficial for the employee and the employer who may wish to acquire new talent to fill the open position.

  • Relocation: An employee may choose to move for a variety of reasons, such as to be closer to family or to support a change in their spouse's career. In these cases, leaving their current job may give them the opportunity to relocate.

  • Change in family dynamic: Employees may choose to leave a company based on changes within their family dynamic, such as having a child or becoming the primary caregiver for a loved one. This type of employment separation may be temporary or permanent.


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