Termination Letter | Meaning, Types, and Steps to Write it

termination letter

Termination of employment, pleasant or unpleasant, is still a part of the employer’s job. It involves terminating an employment contract, and one way to do that is by using an ideal termination letter because this letter is an essential part of the termination process. In this article, we will discuss the termination letter’s meaning, why it is important, how to write one, along with its template and sample for your guidance.

What is a Termination Letter?

A termination letter is a document that formally informs an employee of their termination from employment and mentions important details like the reason for termination, final settlement, and termination date. It also includes other important information like the next steps employees are required to take, if they are entitled to any compensation or not, and how they can receive their final salary and documents. This letter is also known as a termination statement, disqualification letter, or notice of termination.

Why is a Termination Letter Important?

It is important as it shows professionalism and serves as an important legal proof whenever required in the future. A contract of employment provides both parties with an option to terminate the contract by giving prior notice to the other party. The termination letter serves as a formal notice to the employee from the organization’s side.

Whenever any employee gets terminated, it is expected to give them a reason behind their termination from the job. If possible, the reason should be conveyed to them through face-to-face verbal communication, but generally, the termination informs them of the reason for termination and also includes the process to be followed for the same.

An Ideal termination letter is necessary to consider the employee’s concerns and focuses on ending the relationship in a good manner. It is important to give a fair amount of time and compensation to the employee so that they can handle the situation and prepare themself for finding their next employment. Thus, issuing this letter and including everything mentioned above can be considered as a respectful and generous way to end terms with the leaving employee.

Types of Termination Letters

There are many types of terminations, but all of them fall under these 2 basic termination letters:

1. Termination Letter With Cause

This letter is given to the employee when they are terminated due to issues related to their behavior or performance. For example, if an employee keeps misbehaving with their colleagues despite receiving warnings from the management, then a termination letter with cause can be issued to them, and that letter will clearly mention the reason for the termination.

2. Termination Letter Without Cause

This letter is given to an employee when they are terminated due to reasons related to the company, such as a change in organizational structure or downsizing the workforce. It is unrelated to the employee’s behavior or performance and doesn’t have to mention the reason behind the termination.

How to Write a Termination Letter?

There are many types of terminations, but all of them fall under these 2 basic termination letters:

1. Start with Basic Details

You can start by writing the date when you are drafting the letter. Mention the letter’s subject, which is ‘Termination Letter’, and use a salutation such as ‘Dear’ to address the employee. Include the employee’s full name in the salutation.

2. Write a Formal Statement of Termination

Make a clear statement that the organization has terminated the employee from their employment. You can write it like this ‘ We are sorry to inform you that…’,’ This letter is to notify you that’ or ‘ Please note that..’

3. Mention the Date of Termination

It is important for you to mention the date from which the employee’s termination comes into effect. This would be the last working day for the employee in the organization, and it is decided after considering the notice period stated in the employment contract.

4. Specify the Reason for Termination

Point out the reasons that led employee getting terminated. The letter should indicate that the management has given enough chances to the employee to take corrective steps before deciding to go for the termination.

5. Explain the Settlement Details

Inform about the compensation and benefits that the employee will be entitled to get. Which can be a pension, provident fund, leave encashment, or severance pay. Also, inform them how they can collect their final documents like salary slips or experience certificates.

6. Request Employee to Return the Company Property

If the employee has possession of any company property, such as keys, mobile phone, laptop, or ID card, request them to return such property. If they have possession of any property, then give them enough time to vacate that property.

7. Give a Reminder of Binding Agreements

Some agreements like work completion clause or non-discloser agreements are likely to continue even after the employee leaves the organization. Make sure to give a reminder of such agreements that are still in force.

8. Conclude the Letter

Towards the end of the letter, you can add the contact of the HR representative who the employee can contact for their queries. You can conclude the letter with best wishes or by showing sympathy for the employee. The closing salutation can be anything like ‘Sincerely’ or ‘Best Regards’.

Termination Letter Format

termination letter format

Termination Letter Sample

23 May 2022

Subject: Termination Letter

Dear Niraj Singh,

We regret to inform you that your employment with KET Computers is being terminated with effect from 23 July 2022. For the last six months, the company has been experiencing financial difficulties due to a lack of projects in the computer industry. After exploring various choices to improve the revenue sources of the company, we have finally concluded to reduce the workforce. We regret to say that your position as a field marketing junior executive is a part of this reduction.

Note that the decision is final.

You would receive your salary for the current month after your last working day with the company. You would also be entitled to encash any unused leaves.

Your company healthcare policy would continue to remain in force until 31 March 2023.

Please ensure that you return the company laptop and ID on your last working day with the company.

Please keep in mind that the non-disclosure agreement that you signed at the time of joining the company would remain in force even after you leave the company. A copy of the said agreement is attached for your records.

Please contact the HR department for your final settlement and any related queries.

We thank you for your contribution and wish you luck in your future endeavors.

Best Regards,
[Signature]
[Name]

Conclusion

Writing a termination letter is not an easy or exciting task, there are lots of things to cover in it while maintaining a formal tone, but the above points had covered everything you need to write an ideal termination letter.

FAQs

1. When you Should not use a Termination Letter?

There is no situation where you shouldn’t use this letter, it is extremely important to provide this letter to the employee who is getting terminated from the organization.

2. What is the Minimum Notice Period for Termination of employment?

The notice period stated in the employment contract is considered as a minimum notice period to terminate it. Generally, it lays from one to two months.

3. Is Terminated the same as Discharged?

“Terminated” means that one party is ending the employment contract, while “Discharged” implies that the contract has been completed by both parties and no longer applies.

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