Termination Policy: A Guide for HR Teams (With Template)

Employee terminations, whether voluntary or involuntary, are never easy. Having a well-crafted termination policy in place can make the process smoother for both HR and employees, ensuring legal compliance, reducing stress, and clarifying the steps involved.

So, what should your termination policy include? In this guide, we’ll walk you through the key components of a strong termination policy – plus, we’ll provide you with a template to help you create your own document.

A termination policy outlines the procedures and expectations for ending employment at your organization. It’s a guide for HR, managers, and employees to ensure transparency and consistency in all types of terminations – voluntary and involuntary. 

The goal is to provide clear guidelines, while allowing flexibility in different situations: for that reason, it shouldn’t be overly detailed. A well-structured termination policy minimizes confusion and ensures legal compliance, giving employees a clear understanding of what to expect while HR and management can rely on a structured process to handle terminations fairly and legally.

Moreover, a well-documented termination policy can help to safeguard the company’s reputation. Handling terminations with professionalism and transparency ensures that departing employees leave on good terms, reducing potential negative feedback or legal challenges. A solid policy is also essential to provide HR with a reference point if disputes arise.

A clear termination policy helps employees to understand their rights and ensures compliance with labor laws. It provides structure and consistency, ensuring that all employees are treated fairly and that terminations are handled in a legally compliant manner.

On the other hand, not having a termination policy can lead to confusion, legal risk, and misalignment between employees and management. HR may face challenges in justifying termination decisions, leading to potential disputes or claims of unfair treatment. Additionally, without a documented policy, employees may feel blindsided, which is damaging to morale and productivity.

Let’s examine what a termination policy should look like, starting with a termination policy template, which you can copy and adapt to your organization’s purposes. Then, we’ll break down each section, explaining what to consider when you write your own sections.

Before we continue, we must make it clear that this template is based solely on our expertise in HR and workforce management. To ensure legal compliance and avoid litigation, we suggest you collaborate with your legal team or specialized lawyers to draft your own termination policy.

At [Organization Name], we are committed to ensuring that all employment terminations are handled professionally, fairly, and in compliance with legal requirements. This policy provides clear guidelines for managing terminations with minimal disruption to the workplace while maintaining respect for all employees involved.

Employees may voluntarily terminate their employment by resigning, retiring, or completing a fixed-term contract. An employee absent for [insert number] consecutive workdays without notifying their supervisor (job abandonment) may also be considered to have voluntarily resigned. Employees must submit a written resignation notice to their supervisor and Human Resources within the required notice period.

An employee may be dismissed for reasons including, but not limited to, repeated misconduct, chronic tardiness, absenteeism, unsatisfactory performance, or inability to fulfill job responsibilities. Before termination, employees will typically receive verbal or written warnings and opportunities to improve, unless the offense warrants immediate dismissal (e.g., gross misconduct, theft, or harassment).

Management may terminate employment due to layoffs, restructuring, mergers, or other business-related factors unrelated to employee performance or behavior. Employees affected by such terminations may receive severance pay and other support, based on company policy and legal requirements.

If an employee passes away, their employment will be formally terminated as of the date of death. Final compensation and benefits will be processed according to legal and company policies.

Situations such as furloughs, reduced work hours, or approved leaves of absence do not constitute termination and will be managed under the company’s leave policies.

This policy applies to all active employees, including those currently on leave.

Employees resigning or retiring must submit an official written notice to their immediate supervisor and Human Resources. The standard notice period is [insert number] weeks, unless otherwise specified in contract.

Before terminating employment for cause, the company will follow a fair and documented process, including:

• Providing performance feedback, coaching, and support where applicable
  
• Issuing verbal or written warnings as needed
  
• Exploring alternative solutions (e.g., reassignment or demotion) when appropriate
  
• Reviewing all relevant documentation before making a final decision
  
• Conducting a termination meeting with the employee, supervisor, and HR representative
  

For terminations without cause, employees will receive appropriate notice or severance pay, as required by law. HR will maintain all termination-related records for legal and compliance purposes.

All terminations will be conducted professionally and respectfully. Information about an employee’s termination will be kept confidential and shared only with relevant parties.

[Organization Name] strictly prohibits wrongful termination. Employees must not be dismissed based on discriminatory reasons or retaliation for reporting workplace concerns. Employees who believe they have been wrongfully terminated may seek legal recourse or file an appeal.

Severance pay, where applicable, will be provided as outlined in a written notice. The amount and duration of severance will be determined based on tenure and company policy.

Employees receiving severance may also be eligible for:

• Continued health insurance
  
• Bonus payments or stock options
  
• Job placement assistance such as outplacement or reference letters to aid in their transition
  

All terminated employees will follow an established offboarding process, which includes:

• Completing exit interviews
  
• Returning company equipment (e.g., laptops, ID badges, keys)
  
• Settling final payroll, including accrued vacation and other benefits
  
• Removing access to company systems and data security measures
  

Employees will receive their final paycheck within [insert time frame], including any owed PTO or benefits. In the case of an employee’s death, the final pay will be processed following legal requirements and paid to the designated beneficiary or estate.

HR will notify remaining employees of terminations in a timely and appropriate manner while respecting confidentiality. Layoff announcements will include details on workload redistribution and company plans moving forward.

To maintain morale, management will provide guidance to affected teams, offer counseling or career transition support, and address concerns to ensure a stable work environment.

A strong termination policy is the foundation for fair and transparent employee separations. It should clearly define the different types of terminations, outline the procedures involved, and ensure compliance with labor laws. By establishing clear guidelines, organizations can minimize disputes, support departing employees, and maintain a positive workplace environment.

The ideal termination policy should include the following essential elements:

Clearly outline the different types of terminations in your policy:

• Voluntary termination: When an employee resigns, retires, or does not return after an extended absence.
  
• Involuntary termination (with cause): Dismissal due to performance issues, policy violations, or misconduct.
  
• Involuntary termination (without cause): Layoffs, restructuring, or other company decisions outside the employee’s control.
  
• Temporary employment interruptions: Furloughs, reduced hours, or medical leave that do not constitute termination.

It’s essential to define these categories so that employees understand the differences. Voluntary terminations typically involve an employee choosing to leave, while involuntary terminations are company-driven decisions. Employees should also know how temporary interruptions, like furloughs or medical leaves, differ from permanent terminations. Clearly defining these distinctions can prevent misunderstandings and ensure smoother transitions.

HR should tailor termination procedures based on company size, industry, and legal requirements. It’s also crucial to have legal counsel review the policy before implementation. Your policy should outline:

• Who the policy applies to (e.g., full-time, part-time, contractors)
  
• Grounds for involuntary termination
  
• Steps leading up to termination, including warnings and performance reviews
  
• Employee rights, including notice periods and appeals
  

Having clear termination procedures ensures a consistent approach across the organization. Employees should be aware of the steps leading to termination, including performance improvement plans, written warnings, and opportunities to address concerns. Establishing a structured approach reduces uncertainty and provides HR with a framework to follow in different termination scenarios. Additionally, this section should specify who is responsible for making termination decisions and how those decisions are communicated to employees.

Define the conditions under which severance pay is offered. Typically, severance is provided for involuntary terminations without cause, such as layoffs or downsizing. The policy should specify:

• How severance is calculated
  
• Continuation of benefits (e.g., health insurance)
  
• Any additional perks, such as stock options or bonus payouts
  

Severance policies vary by organization, but offering financial support to terminated employees can help ease their transition. Some companies provide severance based on tenure, while others offer a fixed amount. Including this information in your termination policy prevents uncertainty and ensures fairness. Additionally, consider outlining outplacement services your company offers (such as resume coaching or job search assistance) to support terminated employees in finding new opportunities.

A structured offboarding process helps to ensure a smooth transition, protecting the company by leaving a positive impression on departing employees. Your policy should include:

• Exit interview procedures
  
• Final paycheck and PTO payout details
  
• Return of company property (e.g., laptops, keycards)

Exit interviews provide valuable insights into why employees leave and offer an opportunity to address any concerns before their departure. A well-managed offboarding process ensures compliance with company policies, prevents security risks, and fosters goodwill. Communicating final paycheck details, PTO payout, and other benefits ensures employees leave with a clear understanding of their financial situation post-employment. Additionally, organizations should have a process in place to collect company property and revoke system access to protect sensitive information.

A well-managed communication plan ensures you handle terminations with transparency, preventing confusion and morale issues among remaining employees. Your policy should address how HR will:

• Communicate workforce reductions to teams
  
• Support employees dealing with survivor guilt
  
• Reinforce company stability and future plans

Terminations, especially large-scale layoffs, can create uncertainty among remaining employees. Clear and compassionate communication reassures staff and prevents rumors from spreading. HR should proactively address concerns, offer support resources, and reinforce the company’s vision for the future. Employees should feel secure in their roles and understand the rationale behind workforce changes. Providing ongoing support, such as team meetings and one-on-one check-ins, can help ease concerns and maintain productivity.

A strong termination policy is more than just a legal safeguard—it fosters trust, protects company culture, and ensures fair treatment for all employees. By clearly defining termination types, outlining procedures, and addressing severance and offboarding, your organization can navigate terminations with professionalism and transparency. It also mitigates risks and reinforces a positive employee experience, even in difficult situations.When it comes to employee experience, one of its main components in today’s organizations is providing outplacement services. If your company is adopting an outplacement strategy, you don’t have to navigate this process alone. Careerminds provides modern outplacement services prioritizing employee support through a digital-first, results-driven approach. Contact our experts to learn how we can help your organization manage workforce transitions with confidence and care.