Employee Termination Letter Template

Every business owner knows that hiring good employees is challenging but rewarding. But terminating employees can be even more difficult. Obstacles like honoring labor laws, avoiding lawsuits and maintaining accurate records add to the pressure, but a sound Employee Termination Letter template can help.

What Is a Letter of Termination?

A letter of termination is an official documentation of separation between employer and employee. Most companies in the U.S. ascribe to at-will employment, which means that the employment agreement can be terminated under various circumstances.

Why Do I Need a Letter of Termination?

There are a number of reasons why you might want to use a letter of termination, even though it’s not required by law in most states. As a business owner, it’s essential to keep accurate records of all your business activities. It can also be an important record if you’re audited by the IRS to avoid unnecessary increased taxation or should any litigation arise related to the termination.

When Should I Use a Letter of Termination?

A letter of termination is used when an employee’s services are no longer needed by the employer. The termination can be voluntary on the part of the employee resigning, or involuntary, in the case of firing for breach of contract or behavior or during layoffs. In both cases, it is important to have a written document recording the purposes of termination.

Common Reasons for a Letter of Termination

• Layoff
• Breach of contract
• Resignation
• Retirement
• Expiring contract
• Not fulfilling work responsibilities

How to Write a Termination Letter to an Employee

Address the letter to the employee and be sure to include the full name of the employee, the date of the letter and causes for termination. The letter should be in second person and include relevant information about steps to be taken after the agreement is signed.

Essential Elements in a Sample Termination Letter to an Employee

• Employee’s legal full name
• Employer’s legal full name
• Date of the agreement
• Date of the last paycheck
• Information about severance, if applicable, such as amount owed
• Information about how long after termination the employee is entitled to benefits
• Cause(s) for termination (this should be detailed and include any previous warnings, if applicable)
• References to prior binding agreements signed by the employee, such as confidentiality, non-solicitation or non-compete agreements
• Details regarding return of property and anything else owed by the employee to the employer upon termination
• Signature of both employer and employee

Be Careful of Wrongful Termination

As a business owner, it’s important to make sure you are terminating an employee in accordance with all state and federal labor laws to protect yourself and your company from litigation and further taxation. Cases of involuntary termination are always difficult for both parties, and it is essential to have an accurate record detailing the causes for separation so as not to engender claims of wrongful termination. Both state and federal laws forbid terminating employees for discriminatory reasons like gender or race.

End on a Professional Note

Every entrepreneur and business owner knows that the responsibility of having employees extends far beyond contractual obligations. Employees are part of your team and terminating that agreement can be difficult for everyone. Consider how much notice you want to give them and whether to handle it in person, by phone or by email.

Approaching employee termination sensitively and professionally will be best for all parties, and Incfile’s downloadable and customizable Letter of Termination can help. Be sure to check out our other templates and resources to keep your business in shape and on track.