What Is Termination of Employment?

Termination of employment is simply the end of an employment contract between a company and an employee. An employment termination may happen at the initiation of either party.

What are the types of employee termination?

There are three main types of termination:

• Resignation
• Dismissal
• Layoff

A resignation is when an employee chooses to leave your company on their own. A dismissal is when you fire someone from your team for performance reasons, like failing to meet their KPIs for a given amount of time.

A layoff, on the other hand, is similar to dismissal but isn’t caused by poor employee performance. Instead, you may need to lay off staff members to downsize your business.

What legal considerations are there when terminating an employee?

The most significant legal consideration you should pay attention to when terminating an employment contract is the reason. Regulatory authorities around the world define numerous reasons that you cannot terminate an employee for. Failing to steer clear of these can result in your business being sued.

Another important factor is the terminated employee’s severance package. Depending on your local regulations, this may include a leave encashment deal through which you’ll need to pay for any unused PTO.