Top 10 mistakes to avoid during employee termination

From gross misconduct to violation of company policies to poor performance… There can be many different reasons for terminating an employee. However, employee termination needs to be handled carefully. Not only do businesses have to ensure that they have a valid reason for dismissing the employee, but there are also other pitfalls to avoid.

What are the most common employee termination pitfalls and how can employers avoid them? How can businesses protect themselves against wrongful termination claims?

One of the most common mistakes employers make when terminating employees is not respecting the statutory notice period. The notice period determines how far in advance either employee or employer have to notify the other party in case of resignation or dismissal.

In countries that don’t employ the principle of at-will employment, the local labor law typically defines minimum notice periods employers have to respect when dismissing an employee. In Germany, for instance, the minimum notice period is one month—applicable for employees whose length of service doesn’t exceed two years.

It is possible to include longer notice periods in the employee’s employment contract. In this case, employers have to adhere to the provisions of the individual agreement.

Severance pay is compensation paid to an employee after the end of employment. It is typically offered to employees who are made redundant, laid off, or retire.

Providing severance pay is a legal termination requirement in many countries around the world. In France, for example, employees who are terminated after more than one year of service are entitled to severance pay equal to one-quarter of their monthly earnings for each year of service—plus one-third of the monthly salary for each year of service exceeding ten years.

Additionally, employers might be required to pay out any unused PTOor other outstanding employee benefits.

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A letter of termination is a crucial requirement in the employee termination process in many countries. It is the official written confirmation that the termination is being executed.

The termination letter should be written in a professional manner and provide all the relevant information, such as:

• Employee information,

• The employee’s official last day at the company,

• Dismissal reason, and

• Description of the next steps.

Depending on the jurisdiction, it might be necessary to provide additional information in the termination letter.

In most jurisdictions, employers need a valid reason if they want to terminate an employee. In order to justify the termination, employers should collect as much documentation as possible about the employee’s shortcomings or other reasons why the employee is being dismissed.

This is particularly important when terminating an employee for poor performance. In such cases, employers need to collect evidence of the employee’s underperformance along with any documentation of the efforts that have been made to help the employee improve his or her performance.

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In most countries, employee termination is subject to various restrictions. This includes that employees need to receive an official warning and get time to improve their conduct, performance, or whatever the reason behind the warning.

Again, this is particularly important in cases of employee termination for underperformance, but it is generally not recommended (and in many cases not legal) to fire an employee without prior warning.

Except for cases of at-will employment, employees cannot be dismissed for just any reason. In fact, what counts as a valid reason for employee termination is typically clearly defined by a country’s employment law.

Terminating an employee for a reason that is not outlined in the country’s employment laws is illegal and is likely to land the business in a wrongful termination lawsuit. Not double-checking that the reason for dismissing the employee lies within the legal grounds of employee termination is therefore an obvious pitfall employers need to avoid.

Also, it’s important to be clear and consistent when stating the reason for the dismissal.

In some countries, employee termination requires the agreement of a special government body or the respective labor union. In many cases, this restriction applies primarily to collective dismissals.

In Italy, for example, the employer must notify the works council of any intention to make collective redundancies. However, there are also countries where all cases of employee termination require official approval from statutory authorities and/or labor unions.

Not having a termination meeting is a common mistake employers make when terminating an employee. But even if a final meeting with the dismissed employee takes place, there are several pitfalls to avoid.

A badly managed termination meeting can quickly land the company in hot waters. Here are some tips that will help you avoid any issues with the exiting employee:

• Keep the meeting short and professional.

• Give a clear, objective, and coherent reason why the employee is being dismissed.

• Ask someone from Legal or HR to assist during the meeting.

• Refrain from discussing the employee’s personal traits.

• Make it clear that the decision is final and non-negotiable.

The exit interview shouldn’t be confused with the termination meeting. While the termination meeting is where you break the news to the employee that he or she is being dismissed, the exit interview is your chance to calm the waters and to leave a positive last impression.

A professional, positive exit interview can go a long way towards preventing the dismissed employee from badmouthing the company and causing damage to your employer brand. This is not only important in cases of employee termination for poor performance, but also in cases of redundancy, collective dismissal, and more.

Another common mistake in the context of employee termination is not carrying out all the administrative tasks that seal the employee’s departure form the company. This includes failure to reclaim any business property from the employee and remove the employee’s access to company systems and tools.

Removing the employee from the payroll is also important. Dismissed employees who are not taken off the payroll upon their departure will continue to receive wages and other payments although they no longer work for the business.

No matter how well you manage employee termination, there is always a risk of employees seeking retaliation for what they perceive as unfair dismissal. Here are a few tips for protecting your business.

Issue detailed employment contracts

Whenever you hire a new employee, make sure to issue a detailed employment contract that clearly outlines all the terms and conditions that apply to the employment relationship. Like this, you can avoid any uncertainty when it comes to employee termination.

Include detailed guidance on termination procedures, severance pay, and more and have the contract checked by a lawyer or a solicitor.

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Get professional advice 

In order to remain compliant, businesses need to fully understand the termination timelines and requirements. When working with a global team, this can be hard. Not only do rules and regulations differ from one country to the next, but employment legislation also frequently changes. Organizations with a globally distributed team should therefore consider working with an Employer of Record.

An Employer of Record (EOR) is an employment outsourcing solution that allows businesses to compliantly hire employees abroad without setting up a legal entity in the respective jurisdiction. Once the service contract is established, the EOR handles all things employment on behalf of the client business by becoming the employee’s de jure employer. This includes managing employee termination.

Lano works with a global network of trusted EOR partners that offer their services across a range of over 170 countries worldwide. Book a demo with one of our global employment experts to learn more about how Lano can help you navigate the challenges of terminating employees overseas.

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Employ garden leave if necessary

Garden leave is when a dismissed employee is sent on leave until the end of the notice period. This means that his or her employment is suspended on full pay until the day the employment agreement officially comes to an end.

The main reason why businesses place employees on garden leave is to keep them away from company systems, information, and operations until their official last day. At the same time, sending an employee on garden leave ensures that they adhere to any existing contractual restrictions regarding confidentiality, fidelity, and more.

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Work with independent contractors

Working with independent contractors holds numerous advantages for businesses. For example, they are more flexible than full-time employees and cost the business less money because they pay their own taxes, insurances, and social security contributions.

Another big advantage of hiring contractors instead of full-time employees is that it’s easier to end the contractual relationship. Instead of going through a lengthy, highly regulated termination process, all it takes is to end the service agreement (if there even is one). The only drawback when working with contractors is the need to navigate employee misclassification risks.

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Hire employees based on fixed-term contracts

Hiring employees based on fixed-term contracts is the middle ground between hiring permanent employees and working with independent contractors. Fixed-term contracts offer businesses more flexibility because they don’t require a full termination procedure.

The only problem with temporary employment agreements is that their use is often highly regulated. Many countries limit their use to specific circumstances, such as temporary replacement of an absent full-time employee.