Letter of Termination

What is a letter of termination? 

A letter of termination, also called a termination letter, is a formal notice that an employer sends an employee to inform the employee about their dismissal from employment. A letter of termination is a vital part of the termination process and also indicates important details about the employee’s termination date, final paycheck, benefits, and other useful information for the employee’s transition. A written letter of termination not just helps the employee, it also protects the company. 

What information should a letter of termination have? 

The following are important pieces of information a letter of termination should contain: 

• Termination date
• Reason or reasons for termination
• Details about compensation and benefits
• List of company property items that the employee must return
• Non-disclosure agreements or other notification of agreement
• Contact information of HR

A letter of termination must indicate the circumstances of the separation or dismissal. Generally, three situations could lead to termination:

• With cause. An employee’s work performance or behavior does not meet the standards set by the employer or if the employee violated the company’s code of conduct.
• Without cause. The company had to let go of the employee because of larger market factors like downsizing. 
• End of contract. When the employer decides not to renew a short-term employee’s contract that has ended. 

Are companies required to give a letter of termination? 

Technically, there is no federal law that legally requires employers to give a letter of termination to employees. The Fair Labor Standards Act (FLSA) also does not make it a requirement. Certain exceptions are when employees belong to a union, collective bargaining agreement, company closures, or mass layoffs. However, there are U.S. states that require employers to give written notice of termination.

Even if you do not need to send a letter of termination to employees, remember that it is a valuable part of an amicable and professional termination process. It will be beneficial for both the employee and your business. 

Why is a letter of termination important? 

A letter of termination is an important document because it can serve as documentation to support an unemployment claim. In case an employee was separated for a cause, the letter of termination may also be used in case of a dispute for benefits. 

A letter of termination can protect the company and help the separated employee be aware of useful information.