Donald Trump, the rapacious billionaire real estate developer and host of the hit reality TV show “The Apprentice,” has raised firing someone to an art form. In fact, in 2004, he filed to trademark the phrase “You’re Fired” so he could he could slap the words on clothing, games and casino services. Regardless of how much joy “The Donald” seems to get when dispatching the services of a worker or job candidate, business owners and managers still claim having to let an employee go is the single most difficult thing to do in business.
For example, Herb Brooks, the 1980 US Olympic hockey coach whose team upset the world champion squad from the Soviet Union and won the gold medal, had to trim his roster down by one skater, just days before the Opening Ceremonies in Lake Placid. The player to be cut from the team was Massachusetts Hockey Hall of Famer Ralph Cox, after he’d trained and played with the team for nearly a year prior to the Games. Imagine yourself as Coach Brooks, having to tell a guy who dedicated a year of his life without pay that he wouldn’t be around to reap the benefits of all his hard work. I wouldn’t want that job.
Downsizing. Rightsizing. Restructuring. These have become the euphemisms attached to letting good people go for the good of the company. And there is no right or required way to do it. But there are several things a decorated-apparel business owner can do to ease the pain for everyone associated with job eliminations or a major layoff at a company. Care to explore your options? Let’s go!
Organizations are not by law required to offer severance plans to departing employees. Yet a benchmark study of 2,893 human-resource professionals across the United States reports 82 percent of their companies have a severance policy or practice. If companies do offer packages, most do so as a gesture of goodwill, for altruistic reasons, to entice a former worker not to seek employment with a competitor, or to gain a release from suing the company for wrongful termination afterwards. Your policy regarding offering severance packages can be formal or informal, written or unwritten—it’s your prerogative. If a business does offer severance, it may base the payments on a formula using years of service and other factors.
Money is not the only thing that makes up a severance agreement. First, an employer may offer the person being let go a choice between a lump-sum option and a salary-continuation plan. If the to-be-unemployed person needs money immediately, he is likely to take the lump sum. If extended health insurance is desirable or if a time requirement is necessary to qualify for retirement, pension, or vesting in profit-sharing benefits, he may opt for remaining on the payroll for a prescribed period of time. To calculate the monetary size of the package, the rule of thumb used by many companies that practice severance plan offers is two weeks of pay for each year of tenure with the company. Certainly, you have the liberty to adjust that up or down as you see fit.
Aside from severance pay, you may consider paying the employee for unused vacation or sick time. Allow them to take personal items that you provided for their use—work uniforms, cell phones, PDAs and the like—with them when they leave. Offering an outplacement service is a nice component to a severance package as well. You can contract an outplacement agency to provide the former employee help with her resume, job search, interviewing skills and networking options.
You can check out what your next-door business neighbor does in the event of a layoff but, in the long run, every individual company must decide for itself what its policy should contain. Smaller companies typically choose to keep their policy informal and unwritten because they enjoy greater latitude in determining who is offered a package and who isn’t, the size and scope of the severance agreement, and when to implement the practice or withhold it.
Doing the dirty deed
The fact that severance packages were discussed in this column before the proper way to terminate an employee is not by accident. It implies that you should take as much time planning a layoff, position elimination or termination as it took for you to find, interview, hire and train that person.
Frequently, an employee termination is related to the worker’s performance. If the basis of the firing is performance and the personnel file is filled with glowing evaluations, customer testimonial letters, and the absence of legitimate warnings, admonishments and reprimands, you are asking for litigation to be taken against the company and its officers for wrongful termination. If the employee acts surprised by the news of his termination due to performance, that is usually an indication that the employer had not taken enough previous measures to inform the person of the performance-related problem.
When contemplating firing or laying off employees, carefully review the documentation in the personnel files. You should consult with legal counsel and share with them your files, intentions and plan to offer assistance to the individual to bridge the gap of unemployment before they find work. A good personnel lawyer could then advise you as to whether a lawsuit is likely to be in your future or not.
Once you are set to execute your plan, there are several procedures which should be followed to minimize the chance of problems. First, the termination decision should be communicated in person to the employee—not in a letter, email or phone call. The face-to-face meeting not only allows for communication of the decision but also provides an opportunity to observe the employee’s reaction. Two employer representatives, if at all possible, should be present during the meeting in order to ensure there is a witness to the conversation. Optimally, one of these company representatives would be a supervisor and/or someone of authority with whom the employee feels comfortable. Of course, the meeting should be documented immediately after its conclusion.
Deliver the bad news with as much diplomacy, respect and sympathy as possible but withhold any positive comments about the employee’s performance, regardless of the reason for the termination. The worker should simply be informed of the decision and the general basis for the decision. The reason communicated to the employee should not be conditional, limiting or overly specific as this may impact defense of such action in any future legal proceeding. Likewise, it is not wise to engage in a debate or detailed discussion with the employee as to the reason for the termination. Simply communicate the decision and focus on the future. If the employee gets up to leave or requests to end the meeting before you’ve finished explaining the next steps, it should be permitted. Forcing an employee to remain in the room can constitute false imprisonment and could add to any other claims against the company.
What else must I do?
If you are not presenting a severance agreement offer to a particular employee and you are terminating his employment immediately, it is good practice to have, before the meeting, a check prepared which includes all wages up through and including the date of termination and any accrued unused vacation. The employee should also be provided information regarding:
- COBRA, which gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time;
- HIPPA, which provides important new protections for working Americans and their families who have preexisting medical conditions or might otherwise suffer discrimination in health coverage based on factors that relate to an individual’s health;
- ERISA, which sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans;
- Stock, 401(k), and retirement plans; and
- Unemployment eligibility.
Further, the employee should be permitted to recover his personal belongings and return all company property. The employee should also be informed that no negative information about him will be provided to prospective employers—only a verification that the person did indeed work there, the dates of employment, job title and salary.
In carrying out the termination procedure, the most important things to remember are to be fair in all aspects of your personnel decision, be professional, preserve the dignity of the affected employee, be compassionate, and try to prevent the meeting from becoming confrontational. Remember, the reputation of your business may hinge on the story that a terminated employee will tell to anyone who will listen. Good luck!