Your Step-by-Step Employee Termination Checklist

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The employee separation process should be handled with extreme care to ensure compliance with federal and state notices and final pay requirements.

By Rebecca Morris

Separation is a term used to describe the end of the employer-employee relationship in any business or organization. It may occur voluntarily (e.g., resignation or retirement) or involuntarily (e.g., layoff or termination for cause). Regardless of the reason, when the employment relationship ends, there are certain responsibilities that you as the employer will need to address.The following checklists can be used to help you manage both voluntary and involuntary employee separations.

The following checklists can be used to help you manage both voluntary and involuntary employee separations.eparation is a term used to describe the end of the employer-employee relationship in any business or organization. It may occur voluntarily (e.g., resignation or retirement) or involuntarily (e.g., layoff or termination for cause). Regardless of the reason, when the employment relationship ends, there are certain responsibilities that you as the employer will need to address.

Involuntary Separations

When employee separation is involuntary (i.e., company-initiated), consider the following steps:

Make a decision to terminate. Carefully examine the facts and circumstances of the case before making the decision to terminate an employee. Your decision must be based on job-related criteria and should be supported by relevant and appropriate documentation (e.g., discipline notices, performance reviews, etc.).
Prepare for the meeting. After making your decision, schedule a time and place for the termination meeting and plan to have a witness present. Be prepared to provide the employee with specific reasons for the decision.
Prepare for an unemployment claim. Generally, employees who are involuntarily terminated are eligible for unemployment benefits. Once a former employee has filed a claim for unemployment benefits, you will receive written notice from the state unemployment agency.

Voluntary Separations

When employee separation is voluntary (i.e., employee-initiated), consider the following steps:

Obtain a resignation letter. When employees choose to leave the company voluntarily, they should be asked to complete a resignation letter to document the reason for separation and the effective date.
Prepare for transfer of responsibilities. Once an employee gives you notice that he or she is resigning or retiring, ask the employee to provide you with an outline of current projects so that you can create a plan for re-assigning those duties. If time permits, consider having the departing employee train co-workers on those responsibilities.
Conduct an exit interview. An exit interview is typically conducted with employees who leave the company voluntarily to gather information about their experience working for you. This data is typically used to identify areas in which the business excels, as well as areas that may need improvement.

All Separations

Consider taking the following steps in all separations (employee- and employer-initiated):

Document the reason for separation. This documentation should include the effective date of separation and be kept in the employee’s file. Note: If the employee’s separation is a result of misconduct or performance issues, you should also make sure you keep records supporting your decision (e.g., past performance reviews, disciplinary notices, etc.).
Comply with final pay requirements. Under federal law, final pay is due by the next regular payday, but many state laws have stricter deadlines. At the state level, final pay deadlines generally depend on whether the employee initiates the separation or the employer does. Additionally, some states require that an employee’s final paycheck include accrued, unused vacation and paid time off. Check your state law to ensure compliance and be sure to keep a record of when final pay was provided and exactly what it was for (e.g., salary, commissions, accrued vacation, etc.).
Provide state-required forms and notices. Some states require employers to provide separated employees with certain notices (e.g., a separation form explaining how the employee can claim unemployment benefits). These notices are generally available from the appropriate state agency.
Provide benefits information. If the employee is enrolled in group health insurance sponsored by your company, separation may entitle the employee to health insurance continuation or “COBRA,” which triggers certain notice requirements. Work with your health insurance provider to ensure compliance with these notice requirements. If the employee is enrolled in a company retirement plan, you should also provide information regarding the employee’s options after leaving (e.g., cash out, rollover or keeping the plan as is).
Ensure return of company property. It’s a good idea to get started on the process of collecting company property from the employee as soon as you know the employee will be leaving. Use a Receipt of Company Property or a similar form to track company-issued property that has been returned to you, such as company ID badges, cell phones, laptops, keys, etc. You should also take necessary steps to disable building codes and access to computers and confidential data.
Address the issue of reference requests. Develop a written policy on reference checks and ensure supervisors follow it consistently. Your policy should address the types of information you provide (e.g., dates of employment and position(s) held,) as well as the requirement to obtain written authorization from the employee before providing any information. Upon separation, remind employees of your practice and consider obtaining authorization at that time.
Confirm mailing address. It is important to have the correct address for sending a departing employee’s Form W-2 and other pertinent information in the future. Ask the employee to verify their current address and to notify you if he has a change in address.
Notify key staff and contacts. Notify appropriate staff and key clients or customers that the individual is no longer with your company. Let them know who will be handling his work responsibilities in the future. In general, you should avoid revealing the reason for the employee’s departure.

The employee separation process should be handled with extreme care to ensure compliance with federal and state notices and final pay requirements. You also want to ensure company property is returned and important projects and responsibilities are re-assigned after the employee departs. n Rebecca Morris is the content development manager for ADP HR411. Whether it’s human resources, payroll or benefits, ADP provides the services and insights that let you focus on what matters: growing your franchise. For more information, contact ADP Vice President, Strategic Alliances Joe Francis. Find him at fransocial.franchise.org. Disclaimer: This content provides practical information concerning the subject matter covered and is provided with the understanding that ADP is not rendering legal advice or other professional services. ADP does not give legal advice as part of its services. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. This material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. You should review applicable law in your jurisdiction and consult experienced counsel for legal advice.