What is termination of employment?

Termination of employment is the end of an employment contract between a worker and the business that employs them. Termination can be voluntary or involuntary. Involuntary terminations are due to layoff, dismissal or the conclusion of “at will” employment agreements. In some cases, employers and employees mutually agree that employment will end.

Voluntary termination

There are a variety of reasons a person may volunteer to terminate employment, including:

• Retirement
• A new job
• Relocation
• Career change
• Educational opportunity

Less favorable causes for an employee’s resignation might include:

• Bullying or harassment
• Disagreeable relationship with colleagues or manager
• Lack of career development within a company
• Unpleasant change in job duties

Turnover is a concern for employers because it can be costly to replace employees. In some cases, employers may wish to consider alternative arrangements if the employee is receptive. For example, an employer may offer part-time work or telecommuting as an alternative to leaving.

If the employee indicates in an exit interview that they chose to leave due to job dissatisfaction, that should be an immediate concern for the employer. Efforts should be made to resolve conflicts or offer career development, transfers and other options for valued employees who are dissatisfied.

Mutual agreement

An employee and employer may mutually agree that the employment relationship isn’t a good fit for either party. In some cases, an employer may agree to buy an employee out of a contract or provide severance pay. An employee may agree to maintain the position until it’s been filled by a new employee.

There are two ways an employee can terminate employment willingly. In most cases, employees will give at least 2 weeks of notice before leaving or stay for an agreed-upon amount of time when the termination is mutual. Some employees stop showing up for work, which is considered job abandonment. If you don’t already have a job abandonment policy, you should determine how long an employee has before their absence is considered voluntary termination.

Involuntary termination

When an employer terminates the work relationship, it’s considered involuntary termination. Reasons for involuntary termination include the following:

• Layoffs
• Cessation of “employment at will”
• Dismissal

Layoffs

There are many reasons that a business could need to downsize. There may not be money in the budget to keep as many employees in a division, jobs could be transferred or outsourced or the company could be undergoing organizational changes. Employees who are laid off due to no fault of their own are normally given positive recommendations and unemployment benefits to help them make a transition to another job.

Cessation of “employment at will”

At-will employment agreements permit termination by the employer without cause at any time. Federal and state laws protect at-will employees from wrongful termination for reasons based on discrimination, however, and employers are advised to document decisions to terminate at-will employees. Even if you have at-will employment agreements with your workers, you should take extra steps to protect your business in the event an ex-employee claims wrongful termination.

Some of the reasons you might terminate an at-will employee include the following:

• The employee consistently underperformed
• Excessive tardiness or not showing up for work
• Poor communication between the employee and coworkers
• A negative attitude and problems with authority
• Employment at-will agreements also allow for voluntary termination by the employee for any reason, at any time.

Dismissal

If you don’t have an at-will employment agreement, you may need to formally dismiss an employee. Workers who reach this point have usually been given plenty of opportunities to improve their performance or address concerns their managers have brought up in the past. There are also instances where an employee may be fired for blatantly disregarding corporate policies or violating the law.

Instances where an employee may be dismissed include the following:

• Theft:Theft can involve stealing intellectual property or other employees’ belongings. Employees who’ve signed non-disclosure agreements may be terminated if they share sensitive information with anyone outside the company, including competitors.
• Workplace harassment:Allegations of sexual misconduct and bullying should be taken seriously in the workplace. Before terminating an employee, you should conduct a formal investigation and allow the employee the opportunity to defend themselves. If it’s found that your employee did harass another coworker, this is normally grounds for immediate termination.
• Violation of corporate policies:Workers may act contrary to your corporate policy and ethics. When this occurs, you may first attempt to warn or discipline the employee before ending their employment. If the behavior continues, they may be dismissed.
• Poor performance:Performance issues aren’t always a means for terminating employment, especially if the employee shows steady improvement over time. You may decide to terminate an employee after you’ve offered additional training, mentorship and a performance improvement plan to no avail.

Related: Performance Improvement Plan

Termination processes

Most employees have the chance to prevent termination from their job. You should keep records of all the steps you’ve taken to help your employee succeed at the position prior to ending their employment. If the job was terminated due to company layoffs or the worker left voluntarily, you should keep a record of this as well.

Immediate termination

Employees who commit acts that warrant immediate firing don’t receive any warnings or chances to improve. You should document what happened and provide the reason for their termination in writing, so they know which policy they violated.

Voluntary termination

If your employee is leaving voluntarily, it’s a good idea to conduct an exit interview. It will help you determine what you’re doing right to lure new talent into your business and where you can improve. Note things the employee mentions that caused job dissatisfaction, so you can improve your employee retention rate. Some of the information revealed in an exit interview can also help you weed out employees who are bullying or harassing their coworkers and violating your ethics policy.

Involuntary termination

In the case of a terminated job via layoff, you should inform your employee of their final date of employment and any severance pay they can expect. When workers lose their job due to no fault of their own, they’re entitled to unemployment benefits that can help replace their income and insurance until they find a new job.

Workers who are fired are usually given several warnings before they’re terminated. You may wish to provide one or more verbal warnings before you document the warnings in writing. To protect your business legally, you should have a consistent process for warning employees prior to termination and follow it to avoid claims of wrongful termination.

Related: Letter of Separation

Benefits after termination

An employee may be entitled to unemployment benefits, depending on state laws and the reasons for termination. Employers may also offer a severance package to employees who were laid off. In some cases, compensation may follow termination of employment in a lump sum or weekly amount to cease at a certain date if there’s an employment agreement or contract.

FAQs: What is termination?

Do I owe a terminated employee unemployment benefits?

State laws vary, but workers usually need to be terminated for no fault of their own to qualify for unemployment benefits. If the employee resigned or was fired, they may not be entitled to unemployment benefits.

Can I terminate an employee for taking excessive medical leave?

The FMLA and ADA protect employees from termination due to an illness or medical condition. While there are some instances where it’s legal to terminate a worker for excessive sick leave, it’s best to speak with an attorney to ensure you’re not violating the employee’s rights.

Is termination the same as being fired?

Dismissing an employee results in termination of employment, but mutual agreements, layoffs and voluntary termination are also ways that an employment contract can come to an end.