How to fire an employee: A guide for small businesses

Editorial Team

4 min read
Two women meeting in an office

Firing an employee is an unfortunate reality of doing business. Your relationship with a staff member may reach a point when it’s better to part ways. It’s a tough situation, but there are best practices for terminating an employee that can help ensure you’re legally protected and treating the person with as much consideration as possible.

Terminating an employee isn’t an easy decision (or one that’s reached lightly), and there are a few things to consider before you even speak to your employee. To offer you a helping hand, we’ve compiled six tips for how to fire an employee in a thoughtful and conscientious way. 

1. Give employees a chance to do better

Before you reach the point of firing an employee, let them know what issues you observe and how they can improve. If someone is consistently late, give them warnings and stress the importance of being on time. Communicate your expectations for job performance and how your employee should be meeting those. (An employee handbook distributed during onboarding can be a great tool for setting expectations.)

What’s more, keeping an employee informed about unmet expectations gives them a chance to adjust and signals that there could be consequences down the line.

2. Document your reasons for termination—and make sure they’re legal

Chances are you’ve put a fair amount of thought into it, but make sure you’re clear on the reasons you feel the need for terminating an employee–and put those reasons in writing. Documenting your reasons for firing an employee helps protect you in the event a former employee decides to pursue a wrongful termination suit. 

Most employees are hired at-will, meaning you have a broad right to fire them if things don’t work out. But federal law protects employees from discrimination based on age, race, religion, gender (including LGBTQ+ identity), national origin, or disability as long as it doesn’t interfere with their job performance. Employees are also protected by basic constitutional rights like freedom of speech, even if they interfere with your business. So make sure to factor these considerations in as you document your reasons for termination. Additionally, because each state is different, you should consult a lawyer to answer any questions about the process.

3. Prepare thoroughly beforehand

Figure out what you’re going to say before meeting with your employee. You may even want to prepare a script to help you through what might become a difficult conversation. Also make sure you have your paperwork in order. You might choose to draw up a termination agreement, especially if your business provides benefits to employees, and you may need to offer them COBRA health insurance options or severance pay.

If possible, plan to hand them their final paycheck at the time of termination–that can help prevent loose ends down the line. And, consider providing information regarding unemployment–a requirement in the case of employee layoffs. 

4. Set up a meeting, and don’t go in alone

Schedule a time and place to meet with your employee during work hours. If possible, invite a direct supervisor, business partner, or senior employee to join the conversation. It’s best to have support on hand in case the situation gets emotional or contentious.

Experts also suggest that firing an employee earlier in the week is more considerate than on a Friday. And, you can spare a separated employee more embarrassment by allowing them to gather personal belongings outside of peak business hours.

5. Be compassionate

Losing a job is difficult and destabilizing, so be as considerate as possible of your employee’s situation and their feelings. Keep your conversation private, direct, and focused on work. Don’t criticize them personally or suggest they’re not suited to similar work elsewhere in the future. 

How you approach the unfortunate business of terminating an employee affects your reputation as an employer, so be sure to treat the employee with dignity and respect as you help them through the termination process.

6. Consider your hiring practices moving forward

Prevention is the best solution to any problem, so use an employee termination as a learning opportunity. Consider how you could have avoided the situation. How can you improve your recruiting process to help avoid potential staffing problems in the future? What can you improve or clarify in the onboarding process to set expectations even more clearly–or identify problems sooner? Be open to making any changes you need to in the employee hiring, onboarding, and management processes to help reduce the likelihood of another employee termination. Putting the work in on the front end can help mitigate problems later on.

And, be sure to follow the latest best practices for reaching, recruiting, and training quality employees

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

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