Employee Termination

Develop clear, written policies for termination and follow them unswervingly. These policies should be readily accessible to employees in an employee handbook. The termination guidelines should include definitions of poor performance and gross misconduct, detailed descriptions of the review procedures that may lead to termination, and policies regarding severance, future employment references, and the return of company property.

Document reasons for termination over time, in quantifiable terms where possible.

• Conduct the termination meeting with the employee in a professional manner. The company representative conducting the meeting should be trained in dealing with the wide array of emotions—anger, denial, shock, etc.—that typically appear during such times.
• Give credit for positive contributions. Many experts contend that the shock of termination can be eased somewhat if they hear positive feedback about some aspect of their work performance. "Even in a termination based on performance, prompted by the fact that acquired skills were not adequate for a particular situation, the person's assets and liabilities can still be acknowledged," wrote Richard Bayer in Business Horizons. "A termination-for-performance should not be an occasion for abuse."

Prepare an information package for the terminated employee that outlines all elements of any severance package, including benefits and assistance options. Depending on laws and company policies, the company may provide severance pay, unemployment compensation, compensation for earned vacation days, career and placement counseling, ongoing health insurance, or other post-termination benefits.

• Craft considerate severance payout policies. The method of severance payout can be a major factor in easing (or increasing) an ex-employee's bitterness about termination. For example, Bayer notes that paying out severance in lump sums near the end of the calendar year will inflate the worker's W2 for the year and increase his/her tax burden. Small businesses can spare ex-employees this financial hit by absorbing the modest extra payroll expense of making regular severance payments.

Preserve an environment that enables the terminated employee to leave with dignity. "We should have no trouble arguing for compassionate termination policies that reduce stress on families, mitigate financial hardships, and decrease the chances that discharged employees will suffer debilitating emotional crises," wrote Bayer, who also cites the business advantages of dignified dismissals: "Employees who have witnessed termination with dignity will be more inclined to like the firm and support its goals and mission."

• Notify others that are impacted by the dismissal in a timely manner. This includes other employees, affected clients, and other entities with which your company has a business relationship.

REDUCTIONS IN FORCE (RIF)

Reductions in force (RIF)—also known as work force reductions, downsizing, right-sizing, restructuring, and reorganization—may include a number of methods of eliminating worker hours, including layoffs. Employee terminations in such cases are usually the result of surplus labor caused by economic factors, changing markets, poor management, or some other factor unrelated to worker behavior. Because work force reductions make a company vulnerable to many of the same legal risks inherent in behavior-related terminations, companies usually terminate workers by means of a carefully planned and documented process. The process is typically conducted in two stages: 1) selecting the workers to be dismissed and then terminating them according to the above process; and 2) providing benefits to ease the transition, including severance packages, unemployment compensation, and outplacement services.

Selecting and terminating employees is handled carefully because most profit-maximizing organizations are obviously concerned about losing talent or diluting the effectiveness of the company. But care must also be taken to ensure that the reductions do not violate state and federal laws. As with behavior-related terminations, downsizing terminations cannot be based on bias against protected minorities, or even unintentionally result in an inequitable outcome for a protected group. In fact, extensive legislation exists to protect disabled workers, racial minorities, workers over the age of forty, women, and other groups.

In addition to bias-related laws, moreover, companies must comply with a battery of laws specifically directed at corporate layoffs. For example, the federal Worker Adjustment and Retraining Notification (WARN) Act of 1988 requires companies with 100 or more employees to file at least sixty days prior notice before conducting mass layoffs or work force reductions. Among other stipulations, the notice must be in writing and addressed to employees and specified government workers.

The second stage of the downsizing process, outplacement, is also heavily influenced by legislation aimed at protecting employees. But it is also used to maintain the morale of the work force and to enhance the public image of the company conducting the work force reduction. Outplacement usually includes two activities: counseling and job search assistance. Counseling occurs on both the individual and group levels. Both are necessary to help the displaced worker 1) develop a positive attitude; 2) correctly assess career potential and direction, including background and skills, personality traits, financial requirements, geographic constraints, and aspirations; 3) develop job search skills, such as resume writing, interviewing, networking, and negotiating; and 4) adjust to life in transition or with a new employer.

Many companies assist with the job search by hiring a job-search firm to help their terminated employees find new work. In addition to providing some or all of the counseling services described above, job-search companies act as brokers, bringing together job hunters and companies looking for employees. Job-search companies can expedite the job hunting process by eliminating mismatches from the interview process and by helping both parties to negotiate employment terms. In some cases, the former employer will reimburse job hunting costs as part of the severance package of benefits.

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