How to Handle Employee Terminations the Right Way

Terminating an employee is never easy, but handling the process with professionalism, empathy, and legal awareness can prevent costly mistakes and protect your company’s reputation. Whether it’s due to performance issues, misconduct, or company downsizing, the way you approach an employee’s departure matters.

Here’s a step-by-step guide to ensure a smooth and compliant termination process.

1. Know the Legal Considerations

Before making a termination decision, review employment laws to avoid wrongful termination claims. Some key areas to check:

✅ At-Will vs. Contract Employment – In Arizona and many other states, employment is “at-will,” meaning employers can terminate employees for any reason (as long as it’s not illegal). However, contracts or company policies may impose additional requirements.

✅ Anti-Discrimination Laws – Ensure the termination is not based on protected characteristics such as race, gender, age, disability, or religion.

✅ Final Paycheck Requirements – Some states have specific rules on when and how final wages should be paid. In Arizona, final pay is due within seven days or by the next payday, whichever comes first.

✅ Severance & Unemployment – If applicable, consider severance agreements and be prepared for unemployment claims.

2. Document Performance & Policy Violations

If an employee is being let go due to performance or policy violations, documentation is your best defense against disputes. Keep records of:

📌 Performance reviews and warnings
📌 Written notices of policy violations
📌 Any attempts to help the employee improve (coaching, PIPs, etc.)

If downsizing is the reason for termination, ensure your decision is based on clear, objective criteria to avoid discrimination claims.

3. Prepare for the Conversation

A termination meeting should be direct but respectful. Best practices include:

• Holding the meeting in private with a witness (typically HR or a manager).

• Keeping the discussion brief and professional.

• Avoiding unnecessary blame or emotional reactions.

• Providing clear next steps regarding final pay, benefits, and company property return.

Example script:
"We appreciate your contributions, but after careful consideration, we’ve decided to move in a different direction. Your last day will be [date]. We’ll provide you with details regarding your final paycheck and benefits. HR is available for any questions."

4. Handle the Exit Process Smoothly

✅ Final Paycheck & Benefits – Provide final wages promptly and clarify COBRA or other benefits options.
✅ Company Property Return – Retrieve laptops, badges, or other company-owned equipment.
✅ Security & IT Access – Immediately disable access to company systems to protect sensitive information.
✅ Communication to the Team – Notify employees appropriately without sharing confidential details.

5. Support a Respectful Transition

Even when terminations are necessary, handling them with professionalism can minimize negative impacts. Some additional considerations:

• Offer Outplacement Support – If possible, provide career transition resources.

• Conduct an Exit Interview – Gather feedback that could improve your company culture.

• Keep It Confidential – Avoid gossip or unnecessary discussions about the termination.

Final Thoughts

Employee terminations are challenging, but a well-planned approach can prevent legal risks and maintain workplace morale. If you’re unsure about the right steps, consulting an HR professional can ensure compliance and reduce stress.

Need guidance on employee terminations? Schedule a free consultation with AZ HR Hub today.