What is a termination letter?
A termination letter is a formal notice given to the employee when the employer wishes to end their contractual relationship. A contract termination letter will usually outline the reason for dismissal.
Some reasons why an employer may need to dismiss an employee and therefore draft a termination letter include:
- Incompetency
- Criminal behaviour
- Poor performance
- Gross misconduct
Why is a termination letter important?
Employers should always provide a termination letter to their employees when ending their employment. A termination letter contains essential information that can protect both parties in case of legal action such as unfair dismissal.
When terminating an employment contract, employers must prove that they did not terminate the employee for discriminatory reasons or because the person engaged in protected activities such as filing a workers' compensation claim or reporting discrimination. This is where a termination letter can assist, as it would state the reason for the dismissal.
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What to include in a termination letter
The effective date of termination
Include the date of termination of employment in the event of legal action taken against the employer. The current legislation states that any unfair dismissal claim must be brought to the tribunal within 3 months of the employee being dismissed. Therefore having a termination date can validate or invalidate a claim.
Reason
Provide reasons why the employee is being dismissed. This provides clarity and feedback to the employee on why they are let go. Furthermore, in the event of any legal proceedings, it can be used as evidence to support the company's decision.
Sufficient notice period
Ensure that the notice given is in line with their employment agreement and the statutory notice period. If you don't do this, your employee could argue that they were dismissed without notice or reason. There may be instances where the employee leaves before the notice however, both parties must agree upon this.
It is possible to arrange a pay in lieu of notice (PILON) or garden leave where the employee would receive pay but not be required to work their notice period. This would depend on the wording in the employment contract and the agreement between both parties.
Payment
Employers also must notify employees about any final paycheck amounts and other benefits due under the employment agreements. Often employees are paid a severance or redundancy payment which can be helpful to confirm in the letter to avoid misunderstandings.
Sample employee termination letter
Please see a sample termination letter template below:
(Date)
Dear (Employee Name),
We regret to inform you that your employment at (Company name) is being terminated. We acknowledge your effort and thank you for your contribution throughout your time at (Company name).
The reasons for this decision are outlined below:
(Provide an explanation)
Your last day of employment will be (add date) subject to the notice period in your employment contract. Please return all company property such as the company laptop and office keys by this day.
We will be processing your outstanding salary, and your final wage slip on the next scheduled payment date. Please get in touch if you have any further questions.
We wish you the best in your future endeavours.
Sincerely,
(Your name)
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