A termination letter is a critical document, ensuring that the termination process is handled professionally, legally, and empathetically, can save an organisation a lot of time and money in disputes resolution.
A significant portion of labour complaints are for unfair or wrongful termination of employment. In the US in fiscal year 2023 for example, there was a notable increase in employment-related lawsuits, many involving wrongful terminations tied to claims of discrimination, harassment, or violations of workplace rights (EEOC, 2023).
When you ever receive a termination letter, or have to write and deliver one, it is important to know what exactly it should contain for legal compliance and relevance. This article provides insights into the essential components that should be included in a standard termination letter, relevant for HR professionals and business leaders alike. Ten key contents of termination letters are enumerated and discussed.
One – Clear Identification of Parties Involved
A typical termination letter should start by clearly identifying the parties involved. This might seem basic, but accuracy is critical to avoid confusion, particularly in large organizations.
Employee’s Job Title and Department helps avoid any confusion about the individual’s role and responsibilities. Also the employer’s name and legal business name, as well as any relevant business unit or department involved in the decision should be mentioned.
Example: “Dear [Employee Name],
This letter is to formally notify you that your employment with [Company Name], in the role of [Job Title], is terminated, effective [termination date].”
Two – Statement of Termination and Effective Date
After identifying the parties, the letter should state explicitly that the employee is being terminated, with the effective date of the termination. The termination date is crucial as it impacts the employee’s final paycheck, benefits, and access to company resources. Instead of stating “you are terminated immediately,” it is advisable to specify a precise date.
Example: “Your employment will be terminated effective [Date]. This means your final day of work is [Date].”
Three – Reason for Termination (If Applicable)
This may not apply in all jurisdictions. However, transparency is essential, especially if the termination stems from performance-related issues or disciplinary action. According to global labor practices, providing a clear reason ensures fairness. In many regions, such as in parts of Europe, labor laws require that an employee be given a reason for termination to prevent potential claims of wrongful dismissal.
However, in countries like Ghana or specifically the U.S., which is an “at-will” employment jurisdiction, companies are often not obligated to provide a reason. Yet, in such jurisdictions, it can be beneficial for the company’s reputation and HR policies to offer some explanation.
Example: ”This decision was made due to [specific reasons, such as repeated performance issues or the conclusion of a project].”
Four – Exit Package and Benefits Information
One of the most critical elements of a termination letter is the details of the exit package. The package is often provided as a goodwill gesture and may be required by law in certain countries (e.g., Germany, France, Ghana). The package might include final pay-check information, compensation for unused vacation (leave) days, and Health or Pensions (Provident or other Fund) benefits.
An exit package is however not applicable in many jurisdictions where an employee is dismissed for gross misconduct or dishonourable discharge.
Example: “You will receive an exit package of [Amount], which includes payment for work up to your last day of work which is [Date]. You will also be compensated for any unused vacation (leave) days accrued per the Company’s leave records.”
Five – Instructions on Company Property Return
A clear statement regarding the return of company property is essential for a smooth off-boarding process. This includes items like laptops, mobile devices, security badges, access cards, and proprietary documents. The person to who the property should be returned must be clearly stated. In many jurisdictions, this may be the immediate supervisor who will check and sign off on all properties as returned..
Example: “Please return all company property to [name of immediate supervisor and Job Title], including your laptop and office keys, etc. by [Date].”
Six – Details on Final Pay-check
The termination letter should inform the employee when they will receive their final pay-check, and what the final pay-check will include (regular salary, unused vacation (leave) days, bonuses, etc.). Depending on the jurisdiction, this pay-check may be due immediately or at a later date, so HR professionals must adhere to regional payroll regulations.
Example: “Your final pay-check, including any unpaid wages and compensation for unused vacation days, will be issued on [Date].”
Seven – Non-Disclosure Agreement (NDA) or Non-Compete Clause
If the employee signed any confidentiality agreements or non-compete clauses, the termination letter should remind them of their obligations. This protects the company’s intellectual property and prevents the employee from joining a competitor in sensitive markets or positions.
Example:”As a reminder, your obligations under the Non-Disclosure and/or Non-Compete Agreements signed on [Dates] remain in effect following your termination.”
Eight – Legal Disclaimers and Compliance with Local Labor Laws
Global organizations must ensure that the termination letter complies with local labor laws. HR teams should consult with legal professionals or HR/Labour Consultants to draft termination letters that follow the proper notice period, payout, and employee rights according to local regulations. For example, in countries like Japan, the notice period is typically 30 days, while in others, like India, the period may vary by contract terms.
Example: “This termination is being executed in compliance with the [specific labor law or regulation], subject to [Duration of notice] per the terms of your contract of employment.
Nine – Contact Information for Further Assistance
Providing contact details of an HR representative or department allows the exiting employee to ask questions about benefits, paperwork, or other concerns.
Example: “For any questions regarding your final pay-check or benefits, please contact [HR Representative Name] at [phone number/email].
Ten – Appreciation and Well-Wishes
While a termination letter is formal and must cover legal essentials, it can still include a personal touch by acknowledging the employee’s contributions. Offering good wishes for future endeavours can leave a positive impression.
Example: “We appreciate your contributions during your time with us and wish you all the best in your future endeavors.”
Terminating Employment within the Ghanaian Jurisdiction
When terminating a contract of employment in Ghana, it is essential to align with the provisions of the Labour Act, 2003 (Act 651) and key decisions by the Ghanaian courts. These laws aim to protect the rights of both employers and employees, ensuring fair and justifiable termination practices. The termination letter must necessarily indicate Just Cause for Termination.
Under Section 15 of the Labour Act, 2003 (Act 651), a contract of employment can only be terminated for specific reasons that constitute “just cause.” These include; Incompetence or lack of capability, Misconduct or behavior-related issues, Redundancy or organizational restructuring, health and safety considerations, and expiration of a fixed-term contract – if the employment agreement has a specific end date, the contract automatically terminates at that time unless renewed.
The employer must demonstrate that the reason for termination is objective and legitimate.
Procedure for Disciplinary Action
Just Cause also means that a fair procedure for termination of employment is followed. If termination is due to misconduct or poor performance, the employer must follow proper disciplinary procedures as outlined by the Labour Act and company policies.
Courts in Ghana have held that procedural fairness is crucial to avoid claims of wrongful dismissal such as issuing a warning for minor infractions, conducting an investigation, and providing opportunity for a hearing and room for an appeal of the disciplinary decision if any. Ghanaian Courts have ruled in favour of employees who were terminated without the employer following these procedural steps.
Constructive Dismissal
One interesting civil law concept in Ghanaian employment relations practice is constructive dismissal. The courts in Ghana recognize constructive dismissal, which occurs when an employee is forced to resign due to the employer’s actions, such as drastically changing the terms of employment or creating intolerable working conditions.
The Labour Act does not explicitly define constructive dismissal, but case law has set precedents protecting employees under these circumstances. For example, if an employer unilaterally reduces an employee’s salary or demotes them without cause, the employee may claim constructive dismissal and seek damages for wrongful termination.
Employee Right to Seek Redress or Challenge a Termination Decision
Under Section 64 of the Labour Act of Ghana, an employee who believes they have been wrongfully dismissed has the right to challenge the termination through the Labour Commission or seek redress in the courts. The courts have emphasized that employees should have access to justice if they feel their dismissal is unjust.
A termination letter is more than just a formality. It is an integral part of a company’s off-boarding process. To avoid potential legal complications and protect the organization’s reputation, HR professionals must ensure that the letter is clear, concise, and compliant with local laws.
Whether a termination is due to downsizing, performance issues, or other reasons, handling it with transparency and respect sets the tone for future professional relationships and safeguards the company’s interests.
By carefully drafting termination letters with these essential elements, companies can ensure that they remain fair, compliant, and respectful to both their employees and legal obligations. Legal representatives of HR/Labour Consultants must always be involved in drafting of termination letters to overcome any compliance and practice hurdles.
For Further Reading:
- “Employee Termination: Understanding Legalities and HR Best Practices,” HR Technologist, 2023
- “Global Guidelines for Employee Termination,” SHRM, 2022
- “Employment Contracts and Termination Policies Around the World,” World Bank Labor Regulations Report, 2022
