How to properly terminate an employee’s contract6 min read

Ponder over these three scenarios:


“We brought you in to discuss some difficult matters.


We know you are not happy here, that you are not happy with your performance … We are not happy with it either, and feel you can do better elsewhere.


So today we are going to part company and we are going to wish you good luck. Here is a severance check and a letter of recommendation we want you to have, along with what we owe you.


We want you to take the rest of the day off on us, treat yourself to a nice lunch or would you prefer the cinema?.”


The second scenario:


This manager did not have the courtesy of facing the staff he was about to fire so he called him over the phone instead…


“Go to the admin, she’ll give you your letter. We no longer need your services. Report to accounts, get your salary … We’ll give you a ride home….if you want”


The Third one:


“I honestly can’t stand you! You know nothing! I’ll do you a favour, I won’t sack you. Go and resign! Go on, resign and get out of here!”


The three scenarios have one thing in common, an employee is leaving the paid employ of his employer. But that’s where the similarities end.


The firing approaches  are completely different and could have different outcomes as well!


So how do you terminate an employee’s contract with dignity? And most importantly, how do you avoid getting into legal problems afterwards? First we take a look at the Big 3.


The Big 3: Termination, Dismissal, Directive to resign




Termination could go both ways. Either the employer or the employee can decide to terminate the employment contract.


Or it could be that their contract expired and is not being renewed. If a party dies, that could also terminate a contract.


Something key to take note of: Though it is not compulsory for either party to state why they are terminating their agreement,  notice must be served, the most common being 30 days or monetary compensation paid in lieu of the notice!


Breach this, and you could find yourself in a completely avoidable, protracted and expensive legal drama. I mean who would want that?




If an employee’s conduct is not acceptable, the employer has got every right to dismiss that employee!


And he doesn’t get the courtesy of 30 days notice or remuneration.


Stealing, incompetence, fraud, bribery, competition with employer’s business are all valid cases for a dismissal.


A dismissal shows a force of strength and it sends a signal to the other employees that the employer isn’t playing around. If you mess up the job, you are getting dismissed without any benefits.


In some cases, the employee could get summoned before a disciplinary committee who would then give the recommendation for dismissal, if that’s the case.


Directive to Resign


Asking an employee to resign instead of outrightly firing them could mean many things:


  1. It could be an act of kindness. Jobs are tough to come by, so they wouldn’t want to cause difficulty for the employee in seeking another job


  1. It could be that they don’t want to pay the severance package. Again it all depends on the employment contract signed. If you resign, the idea is you left, the company didn’t ask you to leave so you aren’t getting any package.


  1. The company would like to fire you, but you have evidence of something illegal they’ve done. If the employee resigns instead of being fired, it saves them a lot of headaches.


No business owner of senior executive gets into business for the joy of firing people. However, it is an unpleasant task that must be done.


In order to preserve your relationship with the employee and protect your business from legal problems, bad publicity or even negative vibes from your remaining employees, you should take care to terminate an employee’s contract properly.  There are several important steps you can take, some of which include:


  1.  What is your reason?


It’s okay if you want to let someone go, but what’s your reason? Has a policy been violated? Is it due to poor performance? Or are you simply laying off staff?


Basically, you want to be sure you are letting that person go for a genuine reason and not because of a personal vendetta.


  1. Set up a meeting


No matter how you feel, don’t fire your employee in a room full of her colleagues. What does that say about and about their future in your organisation?


Provide an explanation for your decision. NOT a rehashing of the employee’s records and history with you.


  1. You need to pay up


Provide details about the employee’s final pay, benefits and other compensation. Don’t do it grudgingly 🙂


  1. Notify the remaining employees and department


In as much as you want to keep things private, you’ve got to notify the other employees. Not just to notify them but to take care of any lag that might be created due to the absence of that person.


  1.  Handle potential conflict like a pro


Someone is about to lose his source of livelihood and odds are he didn’t see it coming. So It’s absolutely possible for the ex employee (ha ha) to respond with anger. In the event that happens, you need to stay calm and repeat the message.


Show compassion but be firm. Get it over with.


Key mistakes you completely need to avoid


  1. Communicating your decision inaccurately: This is a big fat come on for trouble! Be clear, be concise about why you are letting that employee go. Don’t apologize, don’t cuddle the employee, tell it as it is.
  2.  Calling the lawyer after the employee has been fired


It’s way cheaper for a lawyer to prevent you from getting in trouble than to get you out of one. Make sure your lawyer goes over the employee contract and every other relevant document before you terminate the contract.


  1. Not retrieving company’s properties


This is a huge mistake that could cost you. Get every single information and property from the employee before they leave your employ. Passcodes, ipads, documents etc


Terminating an employee’s contract whichever approach you take can leave a bad taste in your mouth, but it is a necessary evil. Doing it wrong could put you in a tight spot, so take time to do it right.