Employee Termination Process & Checklist

Setting up an employee termination process, while unpleasant, is a critical part of risk management and safeguarding in business. Letting someone go is never easy but how you handle the process will say everything about your business.

When done right, termination procedures protect your business, your reputation and the people who still work for you. But, done wrong, they can open you up to legal risk and may poison company culture.

At the end of Q2 2025/26 His Majesty’s Courts & Tribunals Service (HMCTS) recorded 515,000 open claims in total, covering single and multiple claims, up 22.6% from the previous year. With tribunal cases on the rise, getting the process right has never been more important.

Here, we’ll outline clear employee termination procedures to help you manage exits fairly, protect your business and remain compliant.

Why proper termination procedures matter

When growing a business, it’s easy to prioritise other aspects of your business that will propel it forward, like sales, marketing and product development to name a few. Things like formal termination procedures, while important, tend to get pushed down the list but putting them off isn’t something you can afford to risk.

A poorly handled exit can create a perfect storm of problems for your business, ones that can be avoided with a proper employee termination procedure checklist. Some of the risks include:

• Legal challenges: Mishandled terminations are a leading cause of unfair dismissal claims. They are costly, time consuming and can do serious damage to your employer brand.
• Reputational damage: Word travels fast and a reputation for treating your people poorly will make it harder to attract top talent.
• Team morale: Learning that a colleague was treated unfairly can erode trust within your team and create a culture of fear rather than productivity and engagement.

Whereas, a fair and structured process will do the opposite. Demonstrating that as an employer you lead with integrity, reinforcing your values, maintaining team morale, leaving the door open for previous employees to return if such an opportunity presents.

Key steps in the employee termination process

A fair termination isn’t something that happens out of the blue. It’s the final step in a process built on clear communication and documentation. Here’s six quick steps to getting it right.

1. Establish clear termination policies

Ensure you have clear policies on performance, conduct and dismissal readily available for all employees to access and within their contracts. Every employee should know where they stand from day one.

2. Document performance and conduct issues

Keep detailed, factual and unbiased records of performance reviews, formal warnings and any agreed upon improvement plans. This part of the process isn’t about building a case against someone, it’s about showing you gave them every opportunity to succeed and without evidence of this, you’re on shaky ground.

3. Conduct a fair investigation

If a termination is related to misconduct, you must conduct a fair and impartial investigation. This means following the Acas Code of Practice on disciplinary and grievance procedures. Gather evidence, speak to all relevant parties and give the employee a chance to state their case before making any decisions.

4. Plan the termination meeting

This is a conversation that requires careful planning. Ensure that you:

• Choose the right time and place: A private, neutral space at a time that minimises disruption is best.
• Have a witness: It’s good practice for an HR representative or another manager to be present.
• Prepare your talking points: Be direct, compassionate and clear. Explain the decision, reference the reasons and avoid getting into a debate.

5. Handle final pay and benefits

Ensure all owed wages, payment for accrued but unused holiday and any applicable notice pay is included. Be prepared to clearly explain the final pay breakdown and provide information on what happens to their pension and other company benefits.

6. Conduct an exit interview

While not mandatory, an exit interview is a powerful tool. It provides an opportunity to gather honest feedback about your business and understand the employee’s perspective. It’s also a chance to ensure a smooth handover of work and end the relationship on a professional and respectful note.

Common mistakes to avoid in termination procedures

Even with the best intentions, it’s easy to make mistakes. Here are some of the common pitfalls to avoid:

• Firing someone on the spot: This almost always bypasses fair procedure and opens you up to claims.
• Lack of documentation: Without a paper trail, it becomes your word against theirs.
• Being inconsistent: Applying rules to one employee but not another is a recipe for a discrimination claim.
• Forgetting the human element: The person losing their job is a human being. A lack of empathy can burn bridges and harm your culture.
• Ignoring the remaining team: Your team will be watching. Be transparent (within legal and privacy limits) about the change and reassure them about the future.

Handled correctly, a termination is a necessary business decision that allows everyone to move forward. It protects your business from legal risks, preserves the trust of your remaining team, and demonstrates your commitment to a fair and respectful workplace.

By implementing clear and consistent employee termination procedures, you’re not just managing an exit, you’re reinforcing the very foundations of your company culture. You’re showing that even during the toughest moments, your business operates with integrity.

Streamlining terminations without the stress with Employment Hero

Managing employee terminations correctly is crucial, but it doesn’t have to be stressful or time-consuming. You started your business to make an impact, not to get buried in HR paperwork.

Employment Hero’s all-in-one HR platform supports you through every stage of the employee lifecycle, from onboarding to offboarding, so you can focus on leading your team, not chasing admin.