If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
Terminating an employee isn't easy, and it isn't cheap. Losing an employee costs as much as $15,000 per employee, according to The Work Institute.
But keeping an employee who isn't a good fit can cost even more, taking an invisible toll on productivity and teamwork.
Knowing when and how to terminate employees who aren't working out is a critical leadership skill. Here's how to do it in a way that follows the law and minimizes the trauma for the employee and your team.
Termination refers to any separation from employment, but the term usually signifies involuntary termination of an employee from a job.
Terminations include being laid off for lack of work. Specific laws apply to employee layoffs.
More than half of complaints filed with the EEOC (Equal Employment Opportunity Commission) each year include retaliation charges, many of which involve wrongful termination. Firing an employee at the wrong time, or in the wrong way, or for the wrong reasons, can land you in court.
This article outlines the potential pitfalls and provides tips for avoiding them.
In every state except Montana, employment is at will, meaning you can fire someone for any reason, so long as it isn't illegal, or for no reason. An example of an illegal reason is one that violates equal employment opportunity (EEO) laws.
Because it costs so much to hire, onboard, and train new employees, firing an employee is usually a last resort.
Here are some examples of legal and illegal reasons for terminating an employee:
Here are some legal reasons you may decide to terminate an employee:
Avoid terminating an employee for any of the following illegal reasons:
Several reasons for termination are only legal in certain circumstances. Review state and federal laws and proceed with caution before firing employees for these reasons:
Once you've determined you need to terminate an employee for a legitimate reason, follow these steps to make the experience as painless and drama-free as possible.
By the time you're ready to fire someone, you should have a record of appraisals, improvement plans, conflict resolutions, or disciplinary actions that document the employee's performance deficiencies in reference to written human resources (HR) policies.
HR software such as Zoho People or Namely HR can make it easier to manage and assemble these critical records.
Based on the employee's record, write a summary of the points you need to convey during the termination.
Use neutral language focused on events and goals rather than on the person.
For example, instead of saying "We've talked repeatedly about calling in and being late, and yet you continue to abuse the policy," you can say, "Following three unexcused absences this month, per our attendance policy, this will be your last day with us."
Write a professional termination letter to share with the employee during your termination meeting. Attach required employee notices under federal laws such as the Consolidated Omnibus Budget Reconciliation Act (COBRA) and any employee forms required in your state.
Having an HR representative in the room provides an independent account of the conversation to back your own. HR can also provide additional support or details and answer the employee's questions.
Resist the urge to apologize, backpedal, or offer encouragement such as "You've been great to work with" or I really wish I could keep you on." Instead, convey your regret for the way things worked out and extend your best wishes for the employee.
Don't try to soften the blow by delaying it. Open the meeting with a clear statement of what is happening and why.
Give employees time in the meeting to process the decision and ask questions, but keep the discussion focused on the future. You can express empathy through statements such as "I appreciate that this is difficult" or "I regret that this wasn't a good fit" without being drawn into bargaining or defending your decision.
Get items such as keys and laptops from the employee during or immediately after the meeting.
You’ll also need to get employee signatures on documents such as termination letters, severance agreements, or nondisclosure agreements. Check state and federal retention requirements to determine how long to keep employee files with these documents.
If you need to escort an employee from the building, be discreet.
Once the employee is gone, gather the team to explain what happened. You can specify the cause in broad strokes if you feel it will allay employees' fears or shore up the team, but avoid sharing personal details to protect the employee's privacy.
The way you deal with poor performance has a ripple effect throughout your organization.
A poor performer can drag down a team's productivity and morale, forcing other employees to pick up the slack. Terminating them makes it clear you are willing to hold employees accountable for contributing to their teams.
Poorly handled terminations, however, can have the opposite effect, and damage employee trust and motivation. That's why it's important to make sure your reasons are legal, build a solid case, and handle every termination the way you would want to be let go from a job that wasn't a good fit for you.
No matter how careful you are, letting someone go will never be an easy or pleasant task. Yet terminating nonperformers is a critical leadership skill that drives small business success. With clear guidelines and support, you can make the best of employee terminations to promote happy, high-performing teams.
Our Small Business Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.