LETTER OF TERMINATION: Definition, How to Write One and Samples

Letter of termination
Image source: iStock

A termination letter can be issued by an employer or an employee, depending on the circumstances, to indicate the end of an employment contract. While termination is not a pleasant procedure, it is an important one. So, in order to effectively end an employment service legally and professionally, we have outlined steps you can take to write a termination letter in this guide, including a sample to get you started.

What Is A Termination Letter?

A termination letter is a document used by an employer to tell an employee that their service is no longer needed. Employee misconduct, such as a breach of company regulations or the law, is the most common reason for termination letters.

While termination letters are typically issued by employers to employees, they can also be written by individuals who choose to leave the company voluntarily (i.e., resignation letters).

Does Termination Mean You Were Fired?

A “termination” simply means an end of employment. It can be in the form of a resignation, or it can simply mean you’re fired.

What Is The Significance Of A Termination Letter? 

A termination letter is a written record of an employee’s dismissal, containing the cause for dismissal and any other relevant data.

This letter is significant because it proves that your organization terminated an employee in a fair and lawful manner.

However, there is more to it than that.

Termination letters are frequently the final step in a process. They can close the loop and show that an employee was given every opportunity to meet expectations and improve performance prior to termination.

This is also one of the last pieces of paperwork that a terminated employee will receive from your company.

From that standpoint, a termination letter can clarify your company’s termination procedures and provide insight into what happens next.

Termination letters, particularly when dismissing senior personnel, may also act as a gentle reminder of the employee’s NDA, non-compete terms, and restraint of trade agreements.

If these penalties are contractually obligated, you may also need to arrange a share transfer or sale with stakeholders.

What Are The 4 Types of Termination?

The 4 types of termination include voluntary, involuntary, end-of-contract agreement, and termination without cause.

What Are The Reasons For Termination?

From both the company and employee perspectives, there might be numerous reasons for employee termination. Among these are:

From the perspective of the Employer:

  • Inadequate performance.
  • Company rules were broken.
  • Disciplinary Action for Employees
  • Harassment, whether sexual, physical, mental, or emotional.
  • Ineffective collaboration and progressive discipline
  • Information leaks to competitors, etc.

From the Employee’s Point of View:

  • Better work opportunities elsewhere.
  • Lack of prospects for advancement, such as staff promotion, etc.
  • Lack of enthusiasm for the job.
  • Plans for studies/business/retirement
  • Personal problems/issues among employees
  • Poor working connection.

Contract Termination Letter

A contract termination letter is an official letter telling an employee that their contract service is being terminated. An employee’s contract termination letter often defines the cause of the turnover, describes the next steps this employee may take, and explains any perks or pay they may receive as a result. Staff workers, for example, may be eligible for severance pay if they have been in a job capacity for at least two years. A termination letter can also be used to cease a legal relationship with another company and outline any final transactions between them.

When Do Employers Issue a Contract Termination Letter?

When specific events occur that result in the termination of an employee’s contract, a corporation can use this sort of letter. Companies can choose whether to issue this notification or just administer salaries in the time before a contract legally ends, according to the Employment Act. Sometimes both parties agree on the termination ahead of time, while in other circumstances, the dismissal is forced. According to the Contracts (Rights of Third Parties) Act, businesses can terminate a contract for a variety of reasons, and they may use a letter during the process to reaffirm the provisions of a contract’s termination clause.

Here are some examples of when an employer might use this type of letter:

  • Some employees may complete three to six months of provisional labor before becoming full-time employees. During this time, management may terminate their job.
  • Employees can be terminated for breach of contract if they miss work for more than two days without notice or violate their contract in any way.
  • An employer has the authority to terminate a staff member’s contract if their behavior breaches a company’s code of conduct or if they somehow misrepresent their workplace.
  • Retrenchment: When faced with external circumstances such as decreasing yearly income, a firm may terminate an employee’s contract, particularly that of its executives, in order to minimize expenses or restructure.

How to Write a Letter of Termination of Service

Writing a termination letter can be challenging, but it is an essential part of the process of terminating an employment relationship.

In this part, we’ll go through everything you should include in a standard termination letter.

Please keep in mind that this is simply a rough guide.

While everything we’ve stated here is appropriate for a termination letter, you’ll also need to do some research to ensure that you’re following all applicable legal rules in your location.

#1. Maintain courtesy

Termination letters are an essential component of the employee lifecycle.

Whether employees are laid off or fired due to misconduct, it is critical to remain professional and courteous during formal contact.

Keep in mind that if the termination is unexpected, you will be reducing an employee’s pay, health insurance, and other living necessities while also putting them in an uncertain position.

While the company’s answer to an employee’s well-being is ultimately not the company’s response, you should be aware of these circumstances before beginning the dialogue and demonstrate compassion if appropriate.

Your termination letter should also serve to reduce some of this confusion by laying out clear and concrete future actions, if applicable.

#2. Collect all relevant information.

Before you begin writing a letter of termination of service, gather all of the basic facts you’ll need to complete the task.

This information will vary based on how long a person has been with the organization and what responsibilities they have.

In some cases, you may not require everything.

If you’re terminating a freelancer or contracted employee, it may be as simple as providing a notice of the last day of work and allowing the contractor extra time to complete any remaining work.

#3. Begin with the basics.

When you start drafting your termination letter, you should start with the basics, such as the employee’s name and position with the organization.

If your company is large enough, you may additionally need to include the employee’s ID, department, and manager or supervisor’s name.

This data can be displayed in a list at the top of the page. To clearly identify the intended recipient of this information, it should be visible, explicit, and straightforward.

#4. Inform the employee of the date of termination.

One of the most crucial pieces of information is the effective date of termination.

This should be included early in the letter to establish clear boundaries for future company operations.

When firing an employee for cause, the termination date may be the same day the letter is issued, effective immediately.

Other times, particularly during layoffs and other situations where there is no reason to fire someone, you may issue an effective end date well in advance (often months) to allow staff time to prepare.

#5. Give the reason(s) for the termination.

The reason for termination is potentially the most important aspect of the entire process from the employee’s perspective because it informs them why they were legally fired.

This section should be clear, honest, and direct.

If employees are fired for cause, you can point to earlier written warnings or months of accumulated paperwork demonstrating poor performance.

More serious issues, such as assault or theft, may also be specified as legitimate causes for termination.

Whatever the reason for termination, be upfront and direct in describing these difficulties so that the employee understands why they were let go.

If the termination is based on a single or recurring event (such as chronic tardiness), offer precise details about that incident.

Be prepared to debate these points with your outgoing employee when you issue this termination letter (if doing so in person), but bear in mind that the decision has already been taken.

Regardless of how the employee behaves, you should plan to terminate the employment.

#6. Explain future compensation and benefits.

Even if you terminate an employee for cause, they will still be entitled to certain benefits, which you must state in your termination letter.

Here’s an example of how this could appear.

“As part of your termination, you will not be entitled to any severance money.” Please keep in mind that this decision has no bearing on your ability to acquire COBRA services at the rates mentioned in the continuation coverage election letter that we will send to you within 14 days of today’s date.”

“We’ve included a severance package worth [severance package amount] that will be paid to you on [severance payment date].”

Companies may offer severance benefits in addition to a pink slip. These are sometimes situational or contingent on some form of NDA. You should be prepared to discuss these topics if they arise.

At the same time, if an employee has accrued paid time off (PTO) or sick leave that is eligible for payment, include it in this area.

If your firm provides COBRA or comparable health plans that extend coverage beyond the employment contract for health insurance and health-related benefits, you can explain such benefits here as well.

#7. Outline the next steps and any disclaimers.

You may need to provide direction on what should happen next, depending on the circumstances of the termination.

Security may be standing by to remove an unhappy employee from the building in the case of abrupt, involuntary termination.

You may wish to give a schedule to enable employees to finish out current contracts, hand over tasks to other team members, and exit with minimal team disruptions for terminations worked out over time.

Human resources may have a policy outlining the processes and procedures to be followed when establishing deadlines for departing employees, therefore examine current policies before developing this section.

#8. Finalize the details and contact information.

A corporation may need to contact an employee beyond their service termination date.

This might occur when employees refuse to return business property or when the company wants to mail a final severance check, tax papers, or other similar communication.

List any important contact information (cell phone, home address, etc.) for your employee as part of the termination process and ask them to check that everything is correct before they leave.

This will allow the company to contact you if there are any unresolved difficulties.

At the same time, make sure to include information on who your worker should contact if any concerns arise.

Remember that standard employee hotlines may be inaccessible to former employees and that local numbers may not be the best points of contact in the future.

How Do I Write A Service Termination Letter To My Employer?

The format of a termination letter to the employer is identical to that of a service resignation letter. It should include the writing date, the termination date, and the reason(s) for the employee terminating the employer-employee relationship. Write the letter in a style that portrays a professional and upbeat attitude. Negative thoughts, opinions, or stories should not be included unless they are essential to illustrate why you are leaving the organization.

Sample Letter of Termination 

Now that we’ve covered the fundamentals of writing a service termination letter, let’s take a closer look at some examples.

Please use this text in your own termination letter templates. Just make sure to tailor the language to the needs of the employees.

Involuntary Termination Letter Sample

Jan. 14 20XX

[Name of Employee] [Employee Name] [The Employee Phone Number] [Employee Email Address]

Regarding the Termination Letter

Greetings, [Name],

This letter is to inform you that your services at [COMPANY] are no longer required, effective immediately.

We’ve witnessed a significant drop in performance during the last three months. We have decided to formally terminate your job due to excessive tardiness and failure to fulfill performance goals.

You will find enclosed a review of our documents as well as the disciplinary steps we took that led to this determination. There is also a summary of any severance and/or benefits payable to you. These will be issued on [DATE], along with your final payday.

If any of this information is wrong, or if you have any further questions, please contact our staff at [NUMBER].

Thank you very much,

[Name] [Title] [Company] [Contact Details]

Employee Contract Termination Letter Sample

Jan. 14 20XX

[Name of Employee] [Employee Name] [The Employee Phone Number] [Employee Email Address]

Regarding the Termination Letter

Greetings, [Name],

We regret to tell you that your employment contract with [COMPANY NAME] will not be renewed this year.

Let this letter serve as formal notice that we intend to terminate your employment on [DATE] in accordance with the employment agreement you signed at the commencement of your engagement with us.

Please complete any outstanding work by your deadline.

While this was not an easy decision, we believe it was the best one for the organization.

You’ve been a vital member of our team during your time with us. However, we’ve decided to go a different path.

Thank you again for all of your efforts, and best wishes for future possibilities!

Thank you very much,

[Name] [Title] [Company] [Contact Details]

Does Termination Affect Future Employment?

Only holding a grudge, speaking poorly of your previous employer, or disclosing to a recruiter that you’re suing the company that dismissed you will impair your chances for future employment. That’s enough to make a recruiter wonder if hiring you is a good idea.

What happens to an employee’s benefits after termination?

The employee’s benefits will likely be terminated as well, but this will depend on the specific company’s policies and the terms of the employee’s contract.

Can an employee contest a termination?

Yes, an employee can contest a termination if they believe it was unjust or discriminatory. They can do this through a grievance procedure or by filing a claim with the appropriate government agency.

Can an employee be terminated without warning?

It depends on the specific company’s policies and the terms of the employee’s contract. In some cases, an employee can be terminated without warning, but in other cases, they may be entitled to a warning or notice period.

What should an employee do after receiving a letter of termination?

An employee should carefully review the letter of termination and any accompanying documents and ask any questions they may have about the termination or their rights. They should also consider consulting with a legal or HR professional if they believe the termination was unjust.

Can an employee receive unemployment benefits after being terminated?

It depends on the specific circumstances of the termination. Generally, if the termination was due to misconduct or poor performance, the employee may not be eligible for unemployment benefits.

Can an employee be terminated while on leave?

It depends on the specific circumstances and the terms of the employee’s leave. An employee may be terminated while on leave if the termination is not related to the leave.

How does a termination affect an employee’s record?

A termination may be noted on the employee’s record and may be considered by future employers during the hiring process.

To summarize,

Employee termination is a typical event in the business sector. While it is rarely a pleasant procedure, it is frequently required. If you find yourself in the position of having to let someone go, you’ll want to make sure that you do so in a professional and legal manner. We have outlined steps you can take to issue a letter of termination in this guide. 

Frequently Asked Questions

What is the purpose of a letter of termination?

Termination letters serve two purposes: they assist employers in keeping track of termination decisions, and they provide employees with the clarity they require to begin the transition to the next stage of their careers.

Is termination letter bad?

A termination letter is not bad. It is only an essential part of the termination process.

can a terminated employee be rehired?

Terminated employees are classified as either eligible or ineligible for rehire. If an employee is eligible for rehire, you should not wait more than six months after the layoff to bring them back.

  1. HOW TO FIRE SOMEONE NICELY: Overcome A Manager’s Biggest Fear(
  2. CONSTRUCTIVE TERMINATION: What is it and How can you avoid it?
  3. HOW TO TERMINATE AN EMPLOYEE: Handling Termination of an Employee
  4. LETTER OF SUPPORT: How To Write A Letter Of Support
  5. TERMINATION FOR CAUSE: Reasons That Could Lead To It
  6. Termination Letter: Meaning, How to Write It & What You Need to Know


Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like