How to Handle Involuntary Terminations at Your Company

Posted February 1, 2018 by Moses Balian in Managing Your Team
Involuntary termination can be a risky process for your business. Reviewing the employee termination process can help keep your company safe.

You’ve made the difficult decision to let someone go. At Justworks, we know that firing someone is one of the hardest and most uncomfortable challenges of operating a business. Knowing your stuff and developing established protocol can be a huge step toward executing your involuntary termination with confidence and tact.

The Ins and Outs of Involuntary Terminations

“At-Will” Employment

Let’s start with the basics. Employment relationships are presumed to be “at-will” in all U.S. states except Montana. This means that, unless an employment agreement specifies otherwise, both the employee and employer have the right to terminate the employment relationship at any time, with or without notice, for any or no reason.

Even the two weeks’ notice rule for resignations? Mere tradition.

Healthy Terminations

Messy terminations are bad for employee wellness, but so are poor performers. Employees notice when a colleague is significantly underperforming. When the repeated failure of an employee to meet expectations is permitted or ignored by the company for too long, it can have devastating effects on the morale, productivity, and retention of good performers.

The absolute best thing you can do is to be proactive about your decision. The safest terminations are the ones you’ve prepared for.

Safe Terminations

So, what might make a termination unsafe? Generally speaking, there are two potential negative outcomes an employer wants to safeguard against when executing a termination for performance:

  1. The undue approval of an unemployment claim.
  2. A lawsuit implicating the employer or manager of wrongful termination.

After a former employee submits an unemployment claim, the company is often sent a document requesting more information about the circumstances surround the termination. A common question used to make the determination is, “Was the employee given written warning or advance notice of their dismissal?”

Related Article: How Does Unemployment Insurance Work?

Setting Up Performance Reviews

Performance Reviews

Written appraisals of employee performance are an important asset for HR departments. A regular performance review cycle can be difficult to maintain for small companies, but they’re an invaluable asset for both employers and employees.

In a perfect world, you’re hosting performance reviews for every employee on a somewhat regular schedule. But at the very least, you should acknowledge when things are going very right or very wrong. If someone is ready for a promotion, their merits and achievements should be catalogued — not only for the sake of recordkeeping, but to educate other employees as to what success looks like at the company.

Performance Improvement Plans

In kind, poor performers should be alerted to their failure to meet expectations. What’s obvious to a manager might not be as obvious to an employee, and you owe them the opportunity to improve based on critical and actionable feedback.

Enter the Performance Improvement Plan, or PIP. This is a semi-formal document used by HR professionals to document specific instances (with dates and timestamps if applicable) where the employee has failed to meet performance expectations.

By pointing and saying “this was not ok,” it arms the employee with the knowledge and understanding to take corrective action. PIPs generally indicate a probationary period of 30 to 90 days, after which performance must meet certain metrics or employment will be terminated.

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Why PIPs Are Good for Everyone

For the underperformer, PIPs eliminate any doubt as to whether performance is up to par (it’s not) and help the employee understand exactly what they have to do to improve.

For the company, it demonstrates a good faith effort to equip the employee with the tools to succeed. Should termination occur, it would be due to continued behaviors which had already been identified and labeled as unacceptable.

Colleagues won’t (or shouldn’t) be aware of when managers administer PIPs. But, colleagues will definitely notice if an underperformer is allowed to skirt by. Nothing undermines morale and productivity more than a notorious underperformer who gets away with it.

If HR or a manager issues a PIP, however, colleagues might notice that the person who was slowing the team down is garnering attention and receiving positive reinforcement from the company for turning things around.

Saying Goodbye

Final Paycheck and Vacation Payout

It’s vital to know the final paycheck and vacation payout laws for the state in which your employee works. Requirements vary drastically. California, for example, requires that you issue a physical final paycheck at the moment of termination (for firing an employee). New York allows you to pay the person their final prorated salary or wages on their normally scheduled payday. In Tennessee, you can wait for 21 days from termination.

Conclusion

Involuntary terminations can certainly be difficult, but they shouldn’t be scary. Ultimately, effective performance management makes terminations a better experience. In turn, well executed terminations improve employee performance. It’s a positive feedback loop that will help your company grow stably, safely, and successfully.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.