Alex Lopez
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Alex Lopez on September 25, 2014

Tips for Creating Termination Policies for Your Business

Firing employees can be difficult and uncomfortable, but is nonetheless an important aspect of business operations. One way to simplify the process and minimize complications is to create the right termination policies for your business. Let’s now take a look at some important areas to cover so you can better manage employee resources and reduce the odds of problems arising.


Meeting Legal Requirements

Before diving in, you must first have an understanding of what’s legally required when terminating an employee. Without adhering to certain laws, you could find yourself in legal trouble with a lawsuit stemming from wrongful termination. One example of wrongful termination is firing someone based on discrimination relating to his or her race, gender, sexual orientation, religion, etc. Another is firing someone because they took off work for medical leave, family leave, jury duty or military leave. Also, you can’t fire whistleblowers that have exposed unethical or legal activity.

Besides this, you need to know which benefits your employees are legally entitled to. Some employees may be able to receive things like unemployment insurance, 401(k) plans and profit sharing plans. In some cases, terminated employees may still be eligible to receive temporary health insurance coverage as well. This guide from the SBA is helpful and will explain how to meet legal requirements in better detail. You may also want to consider getting liability insurance to protect your business from litigation.


Be Clear About What Warrants Employee Termination

When hiring new employees, it’s important that you’re on the same page right from the get go. Accordingly, it’s smart to create a list of criteria that serves as grounds for termination. This might include consistent poor performance, insubordination, misconduct and company downsizing where an employee’s position is no longer required. Doing so will ensure that everyone knows what’s expected of them and what behavior will lead to employees being fired. This should prevent unwarranted accusations and make it easier to terminate an employee who breaks the rules without unnecessary drama.


Employee Termination Notice

There are no definitive requirements in America from the Fair Labor Standards Act (FLSA) demanding that employers give their employees termination notice. However, you may want to consider developing some guidelines about termination notice. Giving notice when possible is beneficial because it can reduce hostility, improve your business’s reputation and create an overall better company culture. This is especially good when terminating loyal employees who have given several years of service so they can have time to find an alternate means of income.

You must also determine your policy about giving an employee their final paycheck. While there are no federal laws about immediately giving out a paycheck, certain states do have legal requirements. That’s why you should contact your state labor office via this resource and inquire into this detail.


Documenting Employee Performance

Another way to protect your business is to maintain accurate records of an employee’s performance and/or behavior. To prevent accusations of wrongful termination or other complaints, you should document as much as possible and keep it on file. According to the SBA, “despite the “at-will” policy, you should document instances of poor performance and tardiness, and maintain good records of employee performance reviews and any previous disciplinary interventions. This will provide legitimacy to your actions and prevent any complaints, lawsuits or accusations that termination was discriminatory.”

Creating termination policies is an effective way to prepare your business for when you must inevitably fire employees. This should make a tricky task somewhat simpler and hopefully keep your company out of any legal backwater later on.