Every reputable company has to deal with employee exits from time to time. Workers might leave to seek opportunities elsewhere, or perhaps the company has decided to move in a different direction. In any case, it's in the best interest of the business to have an employee termination checklist at the ready.
The checklist should come into play at the outset of the termination process. In addition to making the transition run smoothly, these actions will ensure that the company has checked all the boxes from a professional and legal standpoint. They'll also provide departing employees with a sense of community and belonging right up until their last day on the job.
What to Include on Your Termination Checklist
Whether the move was initiated by the worker or the company made the decision to terminate, your employee termination checklist should include the following:
- Initial Communication
- Formal Paperwork
- Transfer of Knowledge
- Notifying Others
- Collecting Company Property
- Changing Employee Access
- Conducting Exit Interviews
- Processing Termination Records
- Administrating Final Pay
- Addressing Benefits
- Updating Contact Information
Those are the basics. Let's talk a bit more about what each step should entail.
It's safe to assume that when a termination occurs, either the employers or the employee will be caught off-guard. That's why early communication should be a priority.
As soon as the termination announcement is made, reach out to key departments to ensure that everyone is in the loop. Human resources, payroll, IT, and the top brass should all be made aware of the decision.
Also, be sure to keep the employee informed throughout the process. That's the best way to ensure that they'll feel respected and valued right until the end.
What type of termination is this? Was the employee laid off unexpectedly, or did they tender their resignation themselves? Depending on the answer, you'll need to file one of the following: a termination letter or a resignation letter.
If the termination is involuntary, you (as the employer) will need to produce a formal document that details the reasoning behind the dismissal. If applicable, it's helpful to include information about any negative performance reviews, disciplinary actions or warnings that preceded the decision to terminate.
Here's what else you should put in a termination letter:
- Details about final salary payment and severance, if any
- Date that benefits will terminate
- Information about legal or contractual obligations
- Options for continuing coverage through COBRA or similar programs
- Information on what happens to their 401(k)
For voluntary terminations, you should collect formal resignation letters from departing employees, stating their intent to leave on a certain date. It would also be helpful if they were to list their reasons for doing so, but this is at the employee's discretion.
Transfer of Knowledge
When you know an employee will be leaving their position, you'll need to decide who will be taking on their usual tasks.
If you're able to hire a replacement before the employee leaves, that's excellent. They'll be able to pass on their knowledge and expertise to the new recruit and answer any questions at the outset.
On the other hand, if you're downsizing and not planning to fill the vacant position, you should delegate any critical tasks to other employees. Again, it's better if this transition takes place while the departing employee is still on board.
It goes without saying that you'll need to notify the HR department when an employee is leaving the company. The top brass will also need to be in the loop, as well as the other members of the departing employee's team.
Regular vendors, clients and customers should also be made aware of the change. For example, if this particular employee was involved in the sales process from lead to close, it will be a big job to train someone else to fill those shoes.
Collecting Company Property
Does the departing employee use a company laptop or cell phone? What about access cards or files that contain privileged information? If they have any of these things in their possession, you'll need to make sure they return them before leaving.
Employees who work remotely—even if it's only part of the time—will also need to return any equipment that was provided for their use. In these cases, you might have to provide prepaid shipping boxes and/or labels to expedite the process.
The protocols for returning company property should be spelled out in the employee handbook. If not, now is the time to update your paperwork.
Changing Employee Access
Another step that's often overlooked is the deactivation of employee access information. It's imperative to confirm that the individual will no longer have access to the company's resources or assets once they've been terminated.
This might be as simple as changing the passwords for the employee's accounts and deactivating their email. If they had access to highly sensitive information—such as banking records—be sure to update the login information for those accounts as well.
Be aware, however, that you'll need to carry this out in a respectful manner. The IT teams will need to be notified about the time frame, so they won't deactivate anything while the employee is still using the system to carry out their final duties.
Conducting Exit Interviews
Exit interviews are more than a mere formality. They allow you to take a closer look at the individual's experience with the company, thereby shining a light on any areas that might be in need of improvement.
Be sure to ask terminated employees about their job satisfaction, their experience with team leaders and co-workers, and any ideas they might have about improving the work environment. It's not necessary to conduct the exit interview face to face—a phone conversation would work just as well.
Once you're armed with this information, use it to implement any necessary changes. That way, you'll be more likely to attract and retain top talent in the future.
Processing Termination Records
Terminated employees need to be removed from the payroll records, as well as the time clock system (assuming they tracked their hours). The human resources department will need to ensure that they're removed from the health insurance, life insurance, vision and dental plans, and any other benefits they might have enjoyed.
There's also the matter of filing the employee's records so they can be accessed for future reference. If your organization is very large, you might need to file additional reports—check the regulations for your industry to familiarize yourself with the proper protocol.
Administrating Final Pay
Regulations involving the administration of the final paycheck vary from state to state, but it's likely that you'll need to deliver it between one to three days of the separation date. Involuntary terminations can play by different rules, so again, make sure you know what's required when deciding to initiate layoffs.
In addition to the final wages, you'll likely need to include any accrued paid time off (PTO), vacation time, outstanding commissions or bonuses, and any other relevant reimbursements. If there's a severance package involved, make sure the payroll department is aware of the details.
If the departing employee has decided to take advantage of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the HR department needs to be made aware so that they can contact the insurance broker. This program allows workers to continue their health insurance coverage for a set period of time while they seek other opportunities.
Employees who invested in a retirement plan during their stint with the company will likely want information on that as well. Let them know what their options are regarding the movement or withdrawal of the funds.
Updating Contact Information
Here's a common scenario: The employee takes a job with a new company in another city, perhaps even another state. When it's time to send out the tax forms at the start of the new year, you don't have the current contact information. This leads to a lot of stress for the payroll and HR departments.
When the employee leaves, remind them to let you know if they move to a new address before the end of the calendar year. This will benefit them as well as you, because they won't have to be scrambling around looking for their tax forms when April rolls around.
Having an employee termination checklist on hand will streamline what can be a confusing and difficult process. If you don't already have one, follow our tips to create a checklist that's both practical and easy to follow.
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