How To Write An Employee Termination Letter

How to fire an employee with tact.

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Last updated: February 16th, 2024

employee termination letter

Last updated: February 16th, 2024

Reading Time: 10 minutes

There are fewer things in our working lives that are more difficult than issuing an employee with a termination letter – unless you’re Gary Vaynerchuk or Elon Musk.

American entrepreneur Gary Vaynerchuk is a proponent of “hire fast, fire fast”, and Elon Musk showed little remorse when firing 80% of Twitter staff when he took over.

As much as I appreciate their qualities, when it comes to how to treat people, I’m in a different camp – and given you’ve arrived here, I suspect you’re a little more conscientious too.

Here’s how to terminate an employee the right way – taking into consideration Australia’s Fair Work Act 2009 and Small Business Dismissal Code.

(Related: How To Double The Productivity Of Your Employees).

Consider The Impact On The Recipient.

There are two dimensions to writing a human, effective, employee termination letter:

  • How you treat people (the human aspect).
  • The art of writing (as well as legal protocols you must follow).

I will cover both, starting with the human aspect.

The very first thing you should do is put yourself in the employee’s shoes.

Important!

Being terminated will occur as a shock/surprise to a lot of people.

They’ll experience a spectrum of emotions as they read their termination letter, the overriding feeling being one of fear.

Take a moment to process that.

How To Deliver The News.

During my corporate career, I did a four-year stint at a subsidiary of the biggest international grocery retailer in the world. The American influence of no-mercy hiring and firing was prevalent.

Every few years, there was a cull of employees.

Oblivious employees turned up to work one day, not knowing it was their last.

People were crying or fighting back tears as they exited their termination meetings. They returned to their desks to collect their personal belongings before saying goodbye.

Soul-destroying as that was for them, it was heartbreaking for those who “survived” the cut.

There was a severe detachment and lack of loyalty because those employees never forgot the way their colleagues were unceremoniously axed.

When issuing a termination letter:

  • Present the letter in a private meeting with management and human resources present.
  • Avoid unnecessary small talk and tell the employee right off the bat why you’re letting them go.
  • Allow ample time after delivering the news for the employee to absorb the news.

Find a discreet meeting room situated away from the wider team (preferably with soundproof walls).

Expert Tip.

Book that meeting room for an additional 15 minutes to allow the employee some time alone to make some calls and figure out the necessary steps they need to take from here.

At some stage, they’ll need to:

  • Gather their belongings from their desk and locker.
  • Return company property.

Facilitating this shortly after you’ve broken the news is poor timing.

Where possible, give the employee the option to return out-of-hours or during off-peak times.

Would you want to walk through an open office with red eyes and flushed cheeks and bid everyone a heartfelt goodbye?

Most prefer privacy.

What if this particular person is a bad apple?

Some employees leave on bad terms. If you’re firing an employee for serious misconduct, the employee will have at least suspected this was coming.

You will (or should) have given them verbal warnings and a written warning.

What if this person made your life a living hell? What if they were late, rude, arrogant, and abusive?

(Related: How To Improve Performance & Cohesion Of Your Team).

You’ll feel the temptation to write a retaliatory termination letter that delivers a satisfying final blow.

However, no matter how poor-performing they were, avoid the temptation to write a termination letter that aggravates them.

Using smug language could backfire. Some people feel so aggrieved that they’ll:

  • Vandalise property.
  • Leave scathing reviews online, damaging your employer brand.
  • Fail to return company property like laptops and phones.
  • Sabotage the company systems like chatbots and customer accounts.

Important!

Ex-employees causing havoc can cost your business thousands. End the employment relationship amicably by treating them respectfully. Take solace in the fact you’ll never have to deal with them again.

What Tone Should I Use?

I won’t dwell on tone too much since I provide two comprehensive templates below that you can use.

But if you decide to deviate from that, you must ensure the tone of your termination letter is formal and professional.

In the worst-case scenario, your letter could be used as evidence in court or a workplace tribunal.

You want to refrain from:

  • Making any jokes – personal jokes will go down like a lead balloon.
  • Using sympathetic language – be sensitive but not excessively emotional.
  • Writing sarcastic comments – you may unwittingly trigger the employee to seek revenge.

Your termination letter should read like legal documentation (because that’s exactly what it is).

(Related: How To Write An Employee Reference Letter).

How To Comply With The Fair Work Act 2009.

You don’t want to find yourself in hot water – and by that, I mean attending court or a workplace tribunal due to unfair dismissal.

The contents of your letter of termination need to be written in accordance with the Fair Work Act 2009.

(Related: What Is A Genuine Redundancy?)

Prior to sending a termination letter, you must warn the employee (for the sake of evidence, written warnings are best) of their serious misconduct or performance issues.

You then need to:

  • Identify the issues with the employee’s conduct.
  • Set out what is required of the employee to address these concerns.
  • Determine a measurable improvement that is to be reviewed at a predetermined date.

If you need more information, check out the Fair Work Ombudsman, the regulator of workplace laws.

Can an employee sue for unfair dismissal?

Employees seeking compensation can launch legal proceedings and sue employers if they feel they have been unfairly dismissed.

The Fair Work Commission (FWC) defines unfair dismissal as:

  • The dismissal was harsh, unjust, or unreasonable
  • The dismissal was not a case of genuine redundancy
  • The employee worked for a small business, and the dismissal was not done according to the Small Business Fair Dismissal Code.

Even though the commission aims to protect employees, just because an employee files a claim does not guarantee the proceeding will go in their favour.

The FWC rejected an unfair dismissal claim by Suzie Cheikho, consultant at Insurance Australia Group (IAG).

She was sacked after her employer found that she “wasn’t typing fast enough”.

IAG claimed to have evidence that showed Chiekho’s keystroke activity, and that she “failed to work her rostered hours for 44 days of the 49 days monitored.”

The FWC found that the dismissal was valid and not “harsh, unjust, or unreasonable”.

What Is Harsh, Unjust Or Unreasonable?

The FWC bases their decisions on whether an employee’s termination was harsh, unjust, or unreasonable.

That may sound a little vague, but here are some criteria for what that constitutes:

  • No valid reason for the dismissal was given in relation to the employee’s capacity or conduct
  • The employee wasn’t notified of that reason, nor were they given an opportunity to respond.
  • The employee had no access to a “support person” during discussions about the dismissal.
  • The employee wasn’t warned that their performance was unsatisfactory.
  • A lack of dedicated human expertise impacts the procedures the employer followed.
  • Any other matters the Fair Work Commission considers relevant.

That last bullet point suggests that not everything is always black and white and that the FWC can exercise their power in more complicated circumstances.

Important!

To apply to the Fair Work Commission for unfair dismissal, an employee must have worked for at least 6 months in a large business or 12 months in a small business (fewer than 15 employees). An employee’s earnings must also be below the high-income threshold ($167,500 in 2023).

What is the Small Business Fair Dismissal Code?

You might occasionally hear the term “Small Business Fair Dismissal Code” bandied around when researching Australian laws and regulations.

Expert Tip.

The Small Business Fair Dismissal Code applies to employers with fewer than 15 employees, and has different rules when it comes to employee dismissal – but the principle is largely the same as the Fair Work Act.

A checklist is available to help employers comply with the code.

If an employee submits a claim against an employer, the employer needs to provide evidence that shows they are compliant with the code.

What’s the difference between the code and the Fair Work Act?

The official code is a paltry 300-word document, and I can’t quite understand why so much weight has been attributed to this.

The Fair Work Act pretty much covers the same thing. Surely an amendment to this act would have been more effective?

Seems like a waste of tax dollars if you ask me. Although I’d genuinely love someone to correct me in the comments below.

The only distinguishable difference between the code and the act is where the code says:

“In [procedural matters] where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.”

Employee Termination Letter Template (Disciplinary Action).

With all that in mind, here are two employee termination template letters: the first is tailored to when termination is a result of disciplinary actions, and the second is for when the company is making a strategic decision to downsize or go in a different direction.

Dear [employee name],

Over the last [denote period in weeks/months], we have assessed your [performance/conduct] against your performance improvement plan, and we regret to inform you that we are terminating your employment at [company name] due to failing to meet our previously agreed-upon targets.

We understand this news may be difficult to process, and we strongly recommend you take this opportunity to reflect on your actions and make improvements accordingly before reentering the workforce.

You are entitled to your salary up until [termination date], and you will also be compensated for any outstanding annual leave you have accrued. In addition, you will receive a separate letter from [HR team/designated team member]with the details of your severance pay and how much you’re entitled to receive.

I’m obliged to remind you of the non-solicitation and non-disclosure agreement you signed when joining [company name] (attached to this letter). Even after you depart the company, these legally binding agreements will remain in effect. Under those agreements, you must delete any information about our stakeholders (such as customers, suppliers, and colleagues) that is stored on your personal devices.

Either your line manager or a member of the HR team will be in touch to retrieve any company property that you currently possess, such as your laptop, carry case, smartphone, chargers, and locker keys.

If you have any further questions, please don’t hesitate to get in touch with [HR team/designated team member] at [email address]. In all cases, we are committed to providing fair and accurate employment references to any prospective employers.

We wish you the best of luck in your future endeavours.

[signature]

[your name]

Employee Termination Letter Template (Strategic Decision).

Dear [employee name],

It’s with sincere regret that I am writing to inform you that we are terminating your employment at [company name] due to [specific reason for termination].

Given the competitive challenges [company name] faces, we had no choice but to take some drastic action and restructure the ailing parts of the business, which means it is no longer financially viable to place staff in certain roles.

I want you to know that this has been a decision that has been subject to months of deliberation and we have tried where possible to avoid this outcome. I also understand this is an incredibly difficult situation for you and that you will need time to figure out your options.

In the meantime, I want to be the first to express that your contributions have not gone unnoticed, and I recognise the enormous impact your departure will have on the business. From the bottom of my heart, thank you for all your hard work during your time working here.

Your salary will be paid in full up until [termination date], and you will, of course, be compensated for any outstanding annual leave you have accrued. In addition, you will receive a separate letter from [HR team/designated team member]that contains details of how much severance pay you’re entitled to.

Whilst the timing of this may seem insensitive, I am obliged to remind you of two legally binding agreements you signed when joining the company (attached to this letter): a non-solicitation and a non-disclosure agreement. These agreements still remain in effect upon termination of your employment. You must delete any information about our customers, employees, or other stakeholders stored on your personal devices.

Either your line manager or a member of the HR team will be in touch to retrieve any company property that you currently possess, such as your laptop, carry case, smartphone, chargers, and locker keys. We appreciate your cooperation in returning those at your earliest convenience.

If you have any further questions, please don’t hesitate to get in touch with [HR team/designated team member] at [email address].

Once again, thank you for all your excellent contributions to our company’s performance and culture.

[signature]

[your name]

Final Word On The Employee Termination Process.

Terminating an employee’s contract rarely engenders a positive response – unless you’re offering a generous severance payment.

Most, however, will be upset and angry. Do you want them to take that anger out in the workplace?

Important!

Think carefully about how much notice you give. Your termination letter might demand that the employee fulfil their contractual obligations for the remainder of their notice period. Good luck with that.

You can expect high absenteeism. It’s better to pay them in lieu of their notice period. Don’t give them an opportunity to sabotage company assets or team morale. That’s a commercial decision you will need to weigh up.

Frequently Asked Questions About Termination Letters.

Here are some frequently asked questions that will help you write a professional termination letter.

Does an employee have to sign a termination letter?

Ordinarily, an employee doesn’t need to sign a termination letter, but the sender should.

If the termination letter constitutes an offer of some sort, like a severance package, then an employee would be required to sign this if they wish to accept the offer.

Severance packages tend to stipulate that the employee waives any right to sue the company or pursue claims against it after their employment contract has been terminated.

An employee may not want to forfeit those rights if they believe they have been wrongfully dismissed.

An employee should seek legal counsel if they are unsure how to proceed.

What constitutes an unlawful termination?

It is unlawful to terminate an employee’s contract based on:

  • Protected attributes, such as race, sex, or political opinion
  • A temporary absence from work due to illness or injury
  • An absence during maternity leave or other parental leave
  • Their membership in a trade union or participation in industrial activities
  • The lodging of a formal complaint or participating in proceedings against an employer.

Employees who believe they have been unfairly dismissed can apply to the Fair Work Commission within 21 days of the dismissal taking effect.

What are protected attributes in Australia?

Under the Fair Work Act in Australia, the following are protected attributes: race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction, social origin, breastfeeding, gender identity, and intersex status.

Bizarrely, hair colour isn’t a protected attribute – and I think it’s high time it carried equal status as the aforementioned. Some harmful stereotypes still prevail in the workplace today, particularly for people with red and blonde hair.

Tommy

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