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Employee Termination Checklist: 8 Things You Need to Do to Stay Compliant

An employee termination checklist helps create a process that details the employee exit process. The checklist includes all the information you need to give and take from the employee, potential company assets you have to retrieve, and best practices.

Josh Fetcher

by Josh Fetcher - August 13th, 2019

An employee termination checklist helps create a proper exit process for your employees, while helping you stay compliant and fair.

Even if your company has always had high retention rates, you’re eventually going to have to say goodbye to an employee. At that point, if you don’t have an employee termination checklist in place, you won’t have a proper process for letting go of that employee.

This not only reflects badly on the company, but might also give rise to compliance issues.

An employee termination checklist helps create a process that details the employee exit process. The checklist includes all the information you need to give and take from the employee, potential company assets you have to retrieve, and best practices.

Complete Employee Termination Checklist

Having a good employee termination process not only makes it easier for your human resources department, but also ensures a smooth transition for your now-former employee.

If you get legal advice on this matter, you will be told that this process will save your HR department and your company from any potential legal issues. Whether an employee leaves or you’re terminating employees, all departing employees should receive the same exit process.

Here’s an employee termination checklist to help you make sure you’re doing it right.

1. Gather Basic Data

The first step is to start collecting some basic data like the employee name, job titles, and their last day at work. Depending on how thorough you want to be, you can also add the reason for their termination, their organizational department, contact information, HR liaison’s name, and the final date of checklist completion.

2. Sync with Human Resources

As soon as you receive a resignation letter, your first order of business should be to inform the HR department. If you’ve received verbal confirmation through the employee, tell them to draft an official letter and submit it to the HR department.

This helps provide a notice (typically 2 to 4 weeks) so that every party involved with the employee can stay informed. This also includes providing notice to banks, credit card providers, health insurance providers, life insurance providers, and other relevant parties.

After that, you will need to gather all documentation, including receipts, termination letters, confidentiality agreements, and performance reviews in the personnel file.

3. Conduct an Exit Interview

Exit interviews are your chance to not only make the employee feel like they made a difference, but also provide insights into your company’s work environment and its processes.

Meanwhile, it provides you with the opportunity to discuss things like the final paycheck, vacation time and sick time, trade secrets, and other company information. It’s also an opportunity to explain the company property retrieval system.

During the termination meeting, let the terminated employee talk about their work experience and how they feel about existing employees. Try to get an idea about what they think about the company, its business processes, and all of the other employees.

Considering that the employee will be applying for other jobs, you should have them sign an agreement that will let you verify their employment at your company. It can also be used as a reference by the employee.

Keep in mind that you will need to get all updated employee information, such as their address, since you have to correctly fill out W2 tax forms. Then, verify all the information (such as the emergency contact information).

4. Sync with the IT Department

The employee most likely has computer access and ID cards. You have to contact the IT staff and tell them when to cut off the employee’s access and disable their IDs.

Meanwhile, you need to decide which employee gets the workload, clients, and customers of the exiting employee. Keep their email account and phone lines active so that you continue receiving business communications.

From there, have IT erase the employee’s computer, cell phones, or any other digital device they had so it can be prescribed to another employee.

5. Close the Property Access

Disable the employee’s ID card, any codes they had, and disable their RFID chip (if they had one). If the codes are similar, change the code for everyone.

Make sure you take any keys, key cards, or other entry access control equipment.

6. Retrieve All Company Property

The longer an employee has been with the company, the more company property they may have in one way or another. That is why it’s best to create a list of all the things given to the employee in their time at your company and share the list with that employee.

Provide a receipt for every returned item to maintain a record and make sure you retrieve a list of devices, accounts, and passwords the employee had.

Here are some common items to add to the list.

  • Keys, key cards, and badges.

  • Phones, laptops, tablets, and other electronic equipment such as printers, software, modems, etc.

  • Books, files, company manuals, customer lists, and any credit cards.

  • Uniforms, safety equipment, tools, and stationary equipment.

  • Company vehicle, bags, and any other asset.

  • Company financial information, price lists, and other important physical documents.

If an employee can’t return any of the company property, don’t make an issue out of it - try to settle it softly instead.

7. Take Care of the Employee Benefits

You have to give your employees a benefits status letter that shows what benefits they have and when they will expire, and how they can take advantage of COBRA (Consolidated Omnibus Budget Reconciliation Act).

You also have to count the unused vacation and sick days and pay your employees for those days. This includes accrued vacation and sick days, too.

Furthermore, you have to make sure that you comply with COBRA, which states that you have to continue providing benefits to employees for a certain time after they’re terminated. This includes retirement plans, insurance plans, HRA’s, HSA’s, and expense account plans.

You also have to take out any unpaid payroll and travel advances out of the employee’s last paycheck. These are all the extra advance payments you gave to the employee for the upcoming months.

On the other hand, you have to make sure you pay all the money owed to the employee in full. This includes any unpaid salaries, commissions, business expenses, severance pay, flexible or health spending account balances, and any other outstanding amount.

When all the additions and subtractions have been listed, calculated, and processed, send the final paycheck to the employee (or a bill if the balance is negative on the employee’s side). State law dictates when the check and any other information needs to be sent.

Depending on the law, you might have to send it all on the next payday, the date of termination, or any other specified date. State law also dictates how you need to send it, which may include a direct deposit, mail, or any other delivery method.

Also, make sure you have the latest time card or timesheet of the employee so the final paycheck date can be confirmed and processed.

8. Maintain and Uphold Employee Agreements

You need to have a record of all the agreements the employee has signed with the company over the years. These might be company-oriented or employee-oriented, either way, they need to be fulfilled.

However, if the employee hasn’t signed any agreement forms for whatever reason, you have to go through the process of explaining what they can and cannot talk about regarding the company. This includes trade secrets, key financial information, and other company information.

The following are some common employee agreements.

  • Non-Compete: A non-compete agreement is when an employee agrees not to work for a rival company after termination.

  • Non-Disclosure: An NDA is a legal contract that outlines all the confidential information, knowledge, and material that each party may come in contact with. It ensures this information doesn’t get shared with third parties.

  • Non-Solicitation: It ensures employees don’t solicit business from the company’s list of customers.

  • Confidentiality: This agreement is a signed agreement that the employee won’t disclose any company details to other parties.

  • Intellectual Property: This agreement ensures that all the assets, work, and developed processes are owned by the company and cannot be claimed by the employee.

Furthermore, there may be other uncommon or unique employee agreements that each company might have.

Final Thoughts

Whenever there are layoffs or when someone’s quitting, there’s a negative atmosphere in the company. Employee termination checklists negate that atmosphere while ensuring that the employee leaves happily - and the company stays compliant.

If you’re still not sure how to make and use an employee termination checklist, you can always enlist the help of GoCo and streamline the process.