We get a lot of questions about how to handle employee departures, whether they’re voluntary or involuntary. It’s clear that entrepreneurs aren’t really sure of their responsibilities in this area. To ensure that you do all the right things, let’s go over the fundamentals so the next time it happens, you’ll know what to do.
The following points are high level and not unique to you, so it’s a good idea to develop a departure checklist to ensure you don’t miss something. Break your checklist down by voluntary versus involuntary, and be sure to include who is responsible for completing each piece.
Resignation Letter
Voluntary Departure // A verbal resignation is okay for starters; that’s usual and expected. But you do need to ask for a formal resignation letter for your personnel files or, at a minimum, a resignation email sent from the employee. Why? You wouldn’t believe how many former employees find their next gig doesn’t work out well, but they haven’t been there long enough to file for unemployment with the new company. They then decide to file for benefits, naming you as the last employer. No, really. That happens. If your file is backed up with a resignation letter, there’s no claim against you for unemployment.
Involuntary Departure // None needed (for obvious reasons).
Final Paycheck
Voluntary Departure // When someone gives notice, you generally pay the person through their termination date, plus anything else you owe, like accrued but unused PTO or vacation pay. Don’t want to pay out PTO or vacation? Be sure you know the rules around payment for time earned. Many courts view accrued but unused time as earned pay. Make sure you know the rules; otherwise, you could easily end up with a complaint filed with the Department of Labor. Nobody has time for that and the hassles it causes. As for voluntary departure, the final pay usually can be made on the next regular payroll.
Involuntary Departure // It’s all pretty much the same, except that many states require that the employee’s final pay be delivered on the separation date. A check will do unless there are other provisions such as a separation agreement that lays out a different schedule in exchange for a release.
Benefits
Voluntary Departure // If you offer benefits such as health, dental, vision or life insurance, there are rules that specify the actions when someone leaves you. If you have more than 20 employees, COBRA takes effect. That means you must offer an extension of those benefits, on the former employee’s dime of course, within a strict timeframe after separation from employment. That is usually 10 days after the final date of employment. Not doing so can land you in hot water. If your company has fewer than 20 employees, depending upon the state in which you do business, State Continuation takes effect. That means the insurance company is required to offer continuation of benefits timely to the departing employee. Both of these mandates are governed by one thing—the employee’s termination date. This means that you have to report these departures timely to the correct entities to be sure your legal responsibilities are met under COBRA or State Continuation.
Involuntary Departure // The procedures are mostly the same as a voluntary departure, unless the departure is for reasons of gross misconduct. If that is the situation, your obligation to provide continuation may be limited. It would be a good idea to talk to a human resources professional or a lawyer if that’s the case. But if gross misconduct is the issue, chances are you have already sought expert advice.
Asset Management
Voluntary Departure // Do you know what company assets are in the possession of your employees? The big things are easy to remember, like laptops and cell phones. But does the employee have office keys, key fobs, files, office materials or other information in his or her personal possession that belongs to you? Think about how you track it. There’s nothing worse than realizing, two weeks after a departure, that you’re missing something important or, worse, strictly confidential. This is incredibly important: If a former employee hasn’t returned something to you by the time they leave and they are due pay, do not hold the check. We can’t stress that enough. Earned pay is considered earned pay (with very few exceptions). There are other means available to you as recourse to retrieve belongings; pay shouldn’t be one of them.
Involuntary Departure // Exactly the same guidelines apply, except you need to get your ducks in a row before termination to know exactly what company material the employee possesses.
Exit Interview
Voluntary Departure // By the time someone leaves for another job, you should have some knowledge about the reasons why. But that’s not always the case. You can learn a lot from someone who has decided to move on. Motivations can be very different, but wouldn’t it be nice to know if there is something you can do differently? Or if you could find out something that you didn’t even know about? If you don’t think you’ll get candor from the departing employee, consider hiring an outside, third-party to
do it for you. It’s amazing what you learn.
Involuntary Departure // Exit interviews are generally not productive if you have dismissed an employee. It’s probably best not to waste the time unless you like angry, hostile exchanges that could open the door to other things you don’t want to deal with.
Shut Them Down
Voluntary AND Involuntary Departures // We’re often shocked that IT systems and access aren’t on the checklist for someone’s last day with you. Bad things can happen if your former employee has access to email, documents, your building or anything else they shouldn’t once they are no longer employed. That is true regardless of whether it’s a voluntary or involuntary departure.
Whether an employee is leaving of his or her own accord or not, be prepared for the situation. Have a plan, a checklist and a process to make sure you’re doing the right things. That may save you a lot of trouble and headaches in the future.
