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Blog Banner of Employee Termination Policy- How To Prepare One

Employee Termination Policy – How To Prepare One

Every organization has its employee termination policies. These policies are different from employment policies because they apply when the services of a worker are terminated rather than when the employee starts working for the company.

The managers and employees must adequately understand the termination policies, and you must know how they can affect your business and the relationship with the workforce.

Employee termination is simply the dismissal of an employee’s employment contract by the employer. Employee termination policy and procedures vary from company to company, but typically it’s done when the employer determines that the services of an employee are no longer needed.

However, it can also happen if the employee breaches their employment contract. If the employer retires an old worker by dismissing them without cause or offering them an early retirement, it is also referred to as employee termination. In this scenario, employees are often laid off, termed job loss, or fired for dismissal without cause.

Legally, an employer must provide notice before terminating the employment of a worker, exception for involuntary terminations due to downsizing or economic hardship.

Employee termination is necessary to keep workers straight and narrow. It also provides some ground rules for the employees to follow and for the employers to avoid legal entanglements by the former employees.

4 Types of Employee Termination

A well thought and comprehensive employee termination policy will list different types of terminations. The most common types of employee termination are:

1. Voluntary Termination

As the title suggests, this is the type of termination that workers take on their own and leave the company voluntarily. There can be several professional and personal reasons why an employee might choose voluntary termination.

It can include a lack of growth opportunities, personal problems, a toxic work environment, and no employee development. If your organization has high voluntary termination, you may be at fault, and you must proactively take steps to correct the situation for the remaining workers.

2. Involuntary Termination

Involuntary termination is when an employer removes an employee from employment for some reason. Low performance, violation of company rules, and acceptable employee behavior can be why a company can choose involuntary termination of the employee. This type of termination can also result as the outcome of employee disciplinary action.

3. Employment at Will

This type of employee termination gives the employer the right to fire a worker anywhere at any place without any reason. Employment at will allows an employer to terminate the employment contract without giving any reason. However, workers can still fight or prohibit such termination if they feel there is some discrimination.

4. Mutual Termination

Here, both parties agreed to employee termination without any objections. Often, mutual termination is the best option as it’s a lot less messy, and there are minimal legal hassles.

Apart from these types of employee termination, there can be other types depending on the nature of your business and the company’s size. It is essential to mention the kind in the employee termination policy of the company to inform workers better.

Labor law or termination rules for employees in India

In India, employee termination has some important rules that employees must follow. Firstly, the organization must offer a notice period of 30 to 90 days. Also, according to the Industrial Disputes Act of 1947, when terminating more than a hundred employees in a manufacturing plant, mine, or plantation unit, government approval must be sought. In other sectors, only notifying the government is enough.

Under Indian labor laws, employees can be terminated for one of the following reasons:

  1. Disobedience or will full insubordination
  2. Fraud, Dishonesty, or Theft
  3. Wilfully damaging employer’s property
  4. Taking bribes/illegal gratifications
  5. Absence without applying for leave for more than 10 days
  6. Late Attendance
  7. Indiscipline at the workplace
  8. Negligence of work
You cannot fire an employee who is pregnant or seeking maternity leave under the Maternity Benefit Act of 2017 in the Indian constitution.

In the employee termination policy, non-solicitation clauses can be used in a limited fashion, but non-compete agreements cannot be enforced according to Indian law unless the employer contractually agrees.

Labor law or termination rules for employees in US

In the United States, most employment is treated as ‘at will.’ It means that both the employer and employees have the legal right to terminate employment without advance notice or procedures. However, under federal, state, or local law, an employer cannot terminate an employee, even at will for any unlawful reason.

The Worker Adjustment and Retraining Notification Act (the WARN Act) governs the mass layoff at any company within the United States. According to the act, an employer laying off 100 or more employees must provide the termination notice 60 days in advance.

Labor law or termination rules for employees in UAE

Employee termination policy template

In UAE, your employee termination policy must be by Article 43 (1) of the Employment Law: “Either party to an Employment Contract may terminate the contract for a good cause, by giving the other a notice in writing.

The employee shall perform his duties during the notice period agreed upon in the contract, provided that the notice period is not less than 30 days and not over 90 days.”

Employee termination policy template

If you need to be made aware of how to create a comprehensive employee termination policy, you can use the shared employee termination policy template.

It is essential to include the purpose, procedures, and final pay rules in detail within the employee termination policy.

Check out a sample employee termination policy template here.

Things to consider for proper employee termination

Evaluating the terms and conditions governing the employment termination policy and procedures is crucial. Here’s what you need to consider to avoid unnecessary lawsuits or further retaliation from former employees.

1. Provide a notice period: It is illegal to fire an employee without warning. A 30 to 90 days notice period must be served before terminating an employee. Also, you must provide a notice mentioning the reason for employee termination. If you fail to provide timely notice to an employee before their termination, they can file a lawsuit against the company.

2. Severance pay: It is the pay that an employee receives as compensation from the employer if the termination is reached with mutual consensus, retirement, layoffs, or employees leaving the company for reasons other than dismissal by misconduct. Severance pay is a highly effective tool to encourage mutual employee termination.

3. Know industry-specific employee termination requirements: There can be additional requirements for valid employee termination policies and procedures. You must know the legal requirements for employee termination within your industry. For instance, in mass terminations in factories, mines, or plantations employing more than 100 employees, the employer must give at least three months of wages as severance to the workers who are proposed to be terminated.

4. Avoid constructive dismissal: A constructive dismissal is a situation created by employers who wilfully force employees to quit even when they don’t want to. The resignation can result from bad working conditions or a change in employment, leaving workers with no choice but to quit. Some common factors that can amount to constructive dismissal are:

  • Reduction in salary
  • A demotion
  • Transfer to a less desirable position
  • Harassment or humiliation by the management
  • Early retirement offers
  • Indirect threats of termination

5. Conduct an exit interview: Exit interviews with an employee who leaves the organization for any reason can benefit the company. Planned exit interviews provide management with important information about the working environment, culture, workforce Management, and the development of the employees.

Can employers terminate employees without giving a reason at any time?

Not, really. Sharing the termination policy with the employment contract during the hiring process is essential. And if you’re an employee, you must always ask for the termination policy before accepting the employment to avoid any unpleasant surprises later.


Employee termination is a complicated procedure code for employers and employees. It is the most feared element of employment, so it is expected to stir emotions in employees. As a manager, you must ease up the process. This is why a comprehensive employee termination policy must be created and shared with all employees.

The next step after proper employee definition is to revoke the terminated employees’ access to the company resources. Manually, it can take a lot of work to achieve this, which is why Truein is an ideal option. A cloud-based, hardware-less employee time and attendance management software, Truein also features auto deactivation or scheduled deactivation of employees. It can be integrated with your company’s employee termination policy implementation to auto-revoke employees’ access or blacklist them.

We hope his guide provided you with a better understanding of employee termination policy and how to handle the procedures swiftly.

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