One of the very hardest things you'll ever do as a business owner is terminate an employee. You need to think about all of these things.
Dear Evil HR Lady,
I am a small business owner (20 full-time employees). I have an employee whose skills were critical to us when she was hired in 2003, however, they have become largely irrelevant in our current business and are now used in less than 20 percent of her work on a weekly basis. Over the last few years, we have re-purposed her with a variety of administrative tasks which she did well. Further retraining in the skills we need is not possible due to the highly technical nature of our work.
On a purely economic basis, my decision should be an easy one. However, this employee also suffers from mental illness. I am aware of her illness. We have been accommodating in terms of her work environment and hours.
I need to let her go because a) we really need to free up the cash to hire the person we need, b) she's barely contributing, and c) her behavior lately has been distressing other employees. But I truly fear that if I terminate her she will finally go over the edge in bad ways I don't want to even contemplate. I wish I could offer her more, but at this point we would only be able to offer a month's severance and perhaps three months of healthcare. Do you have any other suggestions as to how we can make this a positive transition for both parties?
--Compassionate and fiscally responsible boss
Dear Compassionate Boss,
This is a very hard situation to be in. Almost every involuntary termination is heart-wrenching for a boss, but when you can see that it may not only cause the person financial difficulties, but in her case, it's that much harder.
There are two things you need to think about: Your company and your employee. While many people would think that the latter is more important than the former, you've got 19 other employees that rely on your business and if you want to remain compassionate, you have to think about their needs as well as this one employee's.
So first, here's how to protect your company:
Hire an employment attorney. This is going to cost you money, but the right attorney will save you money in the long run. This is not a job for your tax attorney, or the person who helped you incorporate. This is a job for a specialist. Employment law is complicated and you need help.
Be careful what you say. It's clear to me that you are terminating her because she lacks the skills for what you need. However, she also suffers from mental illness, which is (generally) covered under the Americans with Disabilities Act. The federal law goes into effect at 15 employees. It requires you to make reasonable accommodations (which you've done). It does not prevent you from terminating someone subject to the law. It just prevents you from terminating the person because of her disabilities. If you talk too much about her mental health problems, she may be begin to believe that is why the termination.
Severance and general releases are your friends. Your attorney will tell you this, but just to prepare you, both are important to the protection of your company. You say you can do one month salary and three months health insurance. Awesome. If you can stretch either, stretch it. The general release is a legal document which requires that she give up her rights to sue (in certain cases--not everything is waivable, see your attorney) in exchange for the severance. No signature=no severance.
The magic reason for termination: Position Elimination. You aren't firing her for performance. You aren't firing her for her mental health issues. You are firing her because her position is being eliminated. Before you notify her of her termination, have the new job description made and posted. Make sure it contains as few of her responsibilities as possible.
Now, to look out for your employee.
Severance (again!): This will help her live while she looks for a new job. This may be critical to her mental health.
Encourage her to apply for unemployment. Yes, your company takes a financial hit when a former employee applies for unemployment. Suck it up. She's earned it, and by your own account, she's done nothing wrong. She simply lacks the skills. Figure out how to apply and giver her the information.
Outplacement. It would be relatively inexpensive for you to arrange for her to meet with a career coach for 3 or 4 sessions. The coach will help her with her resume, her interview skills, and figuring out what type of job she'd be good at.
Recommendations. Tell her very clearly what you will say in a recommendation. She's worked for you for 10 years, so she'll need your recommendation. You must be honest, but try to be kind. And then live up to that when people call you.
It will not be easy, but sometimes the hard things have to be done by the boss. This is the part of owning a business that is very painful.