Employee Termination Policy-All about it

Employee Termination Policy

A business or any organization consists of many departments, including, Finance, Human Resource (H.R), Legal, Research and Development (R&D), Manufacturing, and many more. The H.R Department manages the responsibility of hiring and firing of the employees in coordination with other sub-departments. Employee termination policy sometimes may be to cut the cost to the company, sometimes due to grievances and sometimes voluntarily.

It is the responsibility of the employers to set up a policy that takes care of the company’s legal obligations. In simple terms, an employee termination policy is a legal written document of the procedure and clauses of terminating an employee in the organization. Keeping in mind that every situation is different, the policy doesn’t go very deep. The termination policy is clear and crisp so that the employee understands why they are being terminated from the organization. Moreover, it is the policy that keeps everything fair for everyone working in the organization. While hiring any employee, the company presents an offer letter, in which every clause, rule, and regulation is written. Failing to which leads to termination of the employment. Like an offer letter that states employment in the company, a termination letter clarifies why the end employment agreement was issued. Terminating an employee is termed to be one of the most challenging jobs of any organization, but for the betterment of the organization, this is one of the crucial steps. The termination policy gives an outline that both employees and their employers know. Whether the termination is voluntary or involuntary, an organization should strictly follow the procedure.

Categorization of Employee Termination

It is not always that the organization is the one who fires the employee; it may be the voluntary decision of the employee as well. Even for that purpose, the employee termination protocol has to be followed. There are two types of termination:

  • Voluntary Employee Termination
  • Involuntary Employee Termination

Voluntary Employee Termination

As the name itself suggest that, employee themselves terminates their services from the organization. Hired for a better job, pursue higher studies, personal problems, inability to have a growth in the present organization, and starting a business are some reasons why voluntary employee termination occurs. According to the policy, the employee needs to resign from the organization by giving the authorities a proper formal letter, maybe with or without reason. The employer accepts the resignation, and then the employee needs to serve the notice period, whose period can be dependent on the organization itself.

Involuntary Employee Termination

Just opposite of voluntary termination, involuntary employee termination happens when the employee has broken the organization’s code of conduct, or the employer faces some internal problem, so he needs to lay off the workforce. Involuntary Employee Termination is further categorized into:

  • Firing Employee
  • Downsizing
  • Termination of Contract

Firing Employee

When an organization hires a candidate as an employee of their company, they accept output from the employee who will be beneficial for the organization, for which the employee is paid. But, due to unsatisfactory work or unacceptable behavior, the organization can fire any employee and follow the employee termination policy.


Downsizing means the organization reduces the manpower from their end. It may be because of various reasons. Due to the modern advancements in technology, most organizations are shifting from manpower to automated artificial intelligent machines. This reduced the cost to the company, so the organization terminates the employees considering various factors.

The other reason may be due to the bankruptcy or their incapability of handling the employee cost.

Termination of Contract

Some employees get hired permanently, whereas some are on a contractual basis for a fixed tenure. The employee gets terminated if the contract period and the project are completed, with the employee termination policy.

There should always be a valid reason for terminating an employee, and that also should be done by following procedures. Suppose the employer is releasing without the policy or on a discriminatory basis. In that case, the employee can go to court, and if the organization is found guilty, it will have to compensate the employee.

What Should Termination Policy Include?

A termination policy should be an open document and known to all. The policy and its rules should be easy and understandable by all the employees. Termination policy should include:

  • Define the policy in crisp form.
  • Differentiate between voluntary and involuntary termination policy clauses and situations.
  • The strict rules, because of which the managers can terminate the employees.
  • The employee termination policy document is accessible by all the members working in the organization.
  • Rehiring process.


Employee termination is not an easy task for the organization, but the job has to be done, and that too in a legal manner. A documented written termination policy makes the employees aware of the points where the termination can take place. The approach also helps the organization to protect itself from various lawsuits. The Employee termination policy will always play a massive role in maintaining the company.

Frequently Asked Questions

  1. Do employers need to state the reason for termination according to termination policy?

Yes, the employers have to give a valid written reason for the termination.

  1. How many types of employee termination policies are there?

There are two types of termination policy; one is voluntary, and the other is involuntary.

  1. Can, employee question the employee termination policy?

Yes, every employee can question the policy, and the employee termination policy is made available to every organization member.

Employee Termination Policy-All about it

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