Crafting An Employee Termination Letter In 2023

As HR professionals, we’re often confronted with the challenging task of terminating an employee’s contract.

Companies can expect to lose around 6% of their staff^[1] due to redundancies or terminations. For an HR manager or business with 100 employees, you’ll probably write around six termination letters yearly (but hopefully fewer!).  

Employee turnover is an inevitability of human resources, but it’s essential to approach this task with sensitivity, professionalism, and adherence to legal requirements.

Let's delve into the essential guidelines for crafting a thoughtful and compliant employee termination letter.

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What is an Employee Termination Letter?

An employee termination letter, also known as a dismissal letter or letter of termination, is a formal written notice informing an employee that their employment with the company has been terminated.

This letter records the decision to terminate the contract, providing the employee with justification and any other relevant information, such as final payments, redundancy payments, etc.

Serving detailed termination letters benefits both parties. Although employers may be legally required to provide one, it’s common courtesy – especially in the case of redundancy or other forms of dismissal unrelated to employee conduct and performance.

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What Should Be Included in an Employee Termination Letter?

The employee termination letter should include the following elements:

• Company Letterhead: The letter should be written on the company's official letterhead, displaying the company logo and contact information.
• Date and Employee Information: The letter should include the date, employee's name, and job title, as well as the employee's address.
• Statement of Termination: Clearly state that the employee's contract is being terminated, along with the effective date of termination.
• Reason for Termination: Provide a clear and concise explanation for the termination, ensuring the reasoning is consistent with company policy and employment law.
• Notice Period and Final Payment: If applicable, mention the notice period, and provide details of any outstanding payments or benefits that the employee is entitled to receive, such as final salary, accrued vacation pay, or redundancy pay.
• Company Property: Include instructions for the return of any company property, such as laptops, ID cards, or keys.
• Confidentiality and Non-Compete Clauses: Remind the employee of any confidentiality or non-compete agreements they may have signed and their ongoing obligations.
• Appeal Process: If applicable, explain the employee's right to appeal the decision and the steps needed to initiate an appeal.
• Signature: The appropriate authority should sign the letter, such as the HR manager or a company director.

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Employee Termination Letter Sample Templates

So, what does an employee termination letter look like in practice?

Sample Template 1: Termination Due to Performance Issues

[Company Letterhead]

[Date]

[Employee Name]

[Employee Job Title]

[Employee Address]

Dear [Employee Name],

I regret to inform you that your employment with [Company Name] will be terminated, effective [Termination Date], due to ongoing performance issues.

Despite several attempts to support your improvement, including [List of Performance Improvement Measures], we have not observed the required progress in your work performance.

This decision has been made after a thorough review of your performance records and consultation with your supervisor.

[Include information on notice period, final payments, company property, confidentiality/non-compete clauses, and appeal process]

Please feel free to contact the HR department if you have any questions or require further clarification.

Sincerely,

[Your Name]

[Your Job Title]

[Company Name]

Sample Template 2: Termination Due to Redundancy

[Company Letterhead]

[Date]

[Employee Name]

[Employee Job Title]

[Employee Address]

Dear [Employee Name],

We regret to inform you that your position with [Company Name] has been made redundant. As a result, your employment with the company will be terminated, effective [Termination Date].

This difficult decision has been made as a result of [Reason for Redundancy, e.g., company restructuring, economic downturn, etc.].

Please be assured that this decision does not reflect your performance or contributions to the company. On the contrary, we genuinely appreciate your hard work and dedication during your tenure with us.

[Include information on notice period, final payments (including redundancy pay), company property, confidentiality/non-compete clauses, and any available support for finding new employment]

You are welcome to contact the HR department if you have any questions, require further clarification, or need assistance in your job search.

Sincerely,

[Your Name]

[Your Job Title]

[Company Name]

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Are Companies Required to Send an Employee Termination Letter?

Legal requirements surrounding employee termination vary widely.

But in any case, providing an official termination letter is a professional courtesy regardless of legal requirements. This is especially the case if you can’t meet with the employee or haven’t seen them in some time (e.g., due to absence).

In Singapore, the Ministry of Manpower^[2] states that if the employment contract outlines a notice period, the employee must either serve the notice period or provide compensation in lieu of notice. The notice period can be waived if the employee and employer mutually agree to do so.

A termination letter is a mandatory requirement. This is true both if the employee decides to resign or you decide to terminate their contract – notice must be provided in writing. Unless the employee is provided a termination letter, they are still considered an employee.

The law varies globally. For example, in the US, no federal law requires a termination letter to be issued, but some states require it. States that require employers to issue termination letters include Arizona, California, Illinois and New Jersey.

In the UK, it depends on the length of service. For instance, it’s a legal requirement to serve a letter to employees who have served for longer than 2 years and also for employees dismissed under certain terms, e.g., related to maternity leave or whistleblowing.

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Summary

HR professionals looking to foster a positive work culture  and employee experience should always issue an official termination letter.

This shouldn’t be viewed solely as a “compliance thing” – it creates a clean break that benefits both parties.

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[1] https://www.netsuite.com/portal/resource/articles/human-resources/employee-turnover-statistics.shtml

[2] https://www.mom.gov.sg/employment-practices/termination-of-employment/termination-with-notice#:~:text=Any%20notice%20of%20termination%2C%20either,an%20employee%20of%20the%20company.