What is an Employment Termination Letter?

An Employee Termination Letter is a notice an employer gives to an employee informing them of their termination, either with or without cause. By delivering the letter, the employer gives the employee proper notice.

This document should include basic information regarding the employee’s dismissal, their name, and the name of the supervisor, manager, or human resources person in charge of the firing process.

An Employment Termination Letter is also known as a/an:

• Contract termination letter
• Dismissal letter
• End of employment letter
• Notice of termination of employment letter
• Notice of dismissal letter
• Letter to employee to terminate employment

How do I fire an employee?

As an employer in the United Kingdom, you must have a valid reason for dismissing an employee. Firing an employee without a valid reason or without following the proper process may result in an employment tribunal claim. These claims have the potential to harm your business and its reputation in addition to being a source of stress.

As an employer, follow these steps to avoid a tribunal claim:

1. Follow your company’s internal disciplinary procedure in cases of misconduct.
2. Take notes during the disciplinary procedure to show that you stuck to fair process.
3. Ensure that you have a valid reason for dismissing the employee such as redundancy, the employee’s capability, or misconduct.
4. Make sure you’re not discriminating against an employee due to their race, religion, gender, sexual orientation, age, disability, etc.
5. Allow the employee the chance to rectify the misconduct after the disciplinary procedure.
6. If the employee doesn’t rectify the misconduct, reconvene with the employee at a later date to formally dismiss them. Be sure to specify your reasoning for dismissal once more.
7. Provide the employee with written notice of their dismissal, including their last day of employment, the reason for dismissal, and any pay in lieu of notice.
8. Remind the employee of their right to appeal their dismissal and provide a deadline in case they choose to do so.

You can only fire an employee instantly if they’ve committed gross misconduct. In these cases, you are still responsible for conducting a full investigation before dismissing the employee.

How do I write an Employment Termination Letter?

Writing an Employment Termination Letter is an important step to take when firing an employee. Use our Termination Letter template to ensure no important details are missed.

1. Note the reasons for dismissal

There are many reasons why an employee just doesn’t work out. These reasons can include the employee’s conduct on the job, or their capability. However, an employee can also be let go because they’re redundant within a company.

Other reasons could include situations such as the end of a fixed-term employment or the failure to complete a probationary employment period.

2. Provide employer and employee details

For both the employer and the employee, include their names and addresses (including city, country, and postcode). For the employer, also include the business type (individual or organisation) and their contact information.

3. Include termination details

Make sure to include these other important details within your document:

Providing notice means that the employer notifies the employee that they will be leaving their job after some set period of time, such as four weeks. Providing pay in lieu of notice means that the employer pays the employee some amount of their wage to compensate for a shorter notice period. The pay in lieu of notice could be for all or part of the notice period.

An employer can provide an employee with:

• A notice period
• Pay in lieu of notice
• Another kind of compensation or notice

The law usually requires that an employer gives an employee notice of dismissal. You should ensure that you know how much notice is required by law or by the employment contract.

In some situations, such as when an employee exhibits serious misconduct, it’s possible to dismiss an employee with no notice.

Note the terminated employee’s official last day of work.

4. Provide final details

You can choose to provide additional details regarding the employee’s dismissal.

You can choose to include details about the termination of an employee’s benefits, if applicable. Note the day that the employee will no longer have access to their benefits, such as the last day of work, last day of the month, or last day of notice.

If the dismissed employee will receive additional compensation or assets, make note of them in the termination letter.

There may be requirements a dismissed employee must meet in order to receive compensation, such as signing a general release form. Make a note of these requirements.

List any property that you require the employee to return, such as keys, phones, computers, or company cars.

5. Include additional clauses

If there is anything that hasn’t been previously addressed in the Termination Letter template that is applicable to your situation, you can choose to make note of it here. Most Employment Termination Letters don’t need additional clauses.

6. Sign the document

Both parties must sign the document to ensure its validity. If you know the date that all parties will sign, make note of it here. You can also choose to cc someone in the letter.

What is termination payment?

A termination payment is a lump sum payment made by an employer when they terminate an employee. In the United Kingdom, there are three main types of employer termination payment:

• Pay in lieu of notice: Also known as PILON, this kind of termination payment is issued when an employee receives a dismissal and payment at the same time, instead of a notice of dismissal where the employee continues to work through their notice period.
• Ex-gratia: These payments are often used in settlement agreements where the employer can make a payment without admitting liability. Latin for “by favour”, ex-gratia payments are voluntary instead of legally obligated.
• Redundancy payment: Employees dismissed due to redundancy are entitled to a payment that’s calculated based on their employment, weekly salary, and age. Redundancy payments have a maximum amount that an employee can receive.

Termination payment packages can also include:

• Unused holiday and sick pay
• Restrictive covenant payment
• Outstanding salary
• Employer pension contributions

Can an employee sue an employer for wrongful dismissal?

Yes. A wrongful dismissal breaches the employer-employee contract. In the United Kingdom, an employer must provide notice of termination to the employee, unless:

• The employee is in their first month of employment
• The employee’s contract states that the employer can dismiss them without notice
• The employee is guilty of gross misconduct

If an employer wrongfully dismisses an employee without the necessary notice period (or pay in lieu of notice), it’s often considered wrongful dismissal. If an employer wrongfully dismissed an employee, not only do they risk the loss of restrictive covenants or contract obligations, such as Non-Compete Agreements, but the former employee could take them to court or bring a claim for wrongful dismissal in an employment tribunal.

To claim wrongful dismissal in an employment tribunal, the former employee must start their claim within three months, less one day, of their date of termination. In contrast, they have six years from their date of termination to bring a claim to the court. As well, an employment tribunal can only award up to £25,000. However, if the employer is found guilty in the court, there is no limit to the amount they may be required to pay the employee.

Related documents:

• Employee Offer Letter: Offer an employment opportunity to a potential new employee.
• Employee Evaluation: Measure the job performance of an employee.
• Employment Contract: Outlines the terms and conditions of employment for your newly hired employee.
• Compensation Agreement: Set out wage expectations for a new hire, or change the wage of an existing employee.