Termination Letter – How to Terminate the Employment Contract

August 04, 2021  •  Reading Time: 13 min.

Writing a termination letter to an employee

Are you the person handling termination at your company? If you are looking for basic information on employee termination, you have come to the right place. We will explain exactly how to write a professional employee termination letter and provide you with all the info on the termination process in general. We also give you practical tips on how to write a termination letter and what to keep in mind. Last but not least, we have essential Dos and Don’ts in the writing process for you and, of course, sample termination letters for every occasion!

What is a termination letter?

A letter of termination is a unilateral declaration of intent requiring receipt by which the employer or the employee terminates the employment relationship.

Termination is subject to special formal requirements, e.g. it must be in writing. It is also only enforceable to a limited extent in case law. For example, notice of termination may not be given completely arbitrarily.

With the letter of termination, you formally end the employment relationship with your employee. To ensure that the termination is effective, you must pay attention to important points – such as the paper form, the timing and the signature. If there are errors in the structure, content or notice periods, the termination is invalid. We will show you how to write a formally correct notice of termination and which regulations you must observe when writing the notice.

When are termination letters used?

If you want to end a business contract, you must send a letter of termination to the other party.

The date of receipt of the notice of termination is decisive for the calculation and the start of the notice period. From a legal point of view, the notice of termination is deemed to have been received when the addressee can take note of it under normal circumstances. In case of personal delivery of the letter, it is sufficient to hand over and deliver the document.

Why are termination letters important?

Notice of termination must always be given in writing.

Employers may not stipulate in employment contracts or in their company policy that notice of termination may be given by any means other than in writing. If this were to happen, the employment termination would be invalid. An email or fax is also not sufficient for a termination letter; the termination must always be in writing in paper form. In addition, the employer must always sign the termination letter – below the text, personally and in full.

How to write a letter of termination

How to write a letter of termination

Have you already sent your employee a formal written warning or even held a termination meeting? Once you have set the contract termination date, you can send an official contract termination letter to the other party. In the following steps, we will give you detailed instructions on how to write a notice letter and also include a complete termination letter example.

Notify the employee of their termination date

After the salutation, you can immediately let the employee know when he or she will be leaving the company.

[Date]

Dear [Employee Name],

This letter is to confirm that your employment with [Company Name] is terminated effective [Date].

Specify the reason(s) for the termination

In this sample letter we are describing a termination letter for cause (dismissal for conduct). You have to include the exact reasons why you are letting the person go.

To our regret, we are under the obligation to terminate the existing working relationship with you due to the following cause(s):

Examples dismissal for conduct:

  • Alcohol and drug abuse
  • Refusal to work
  • Tardiness
  • Property offences to the detriment of the employer
  • Insults, racist remarks
  • Violations of company regulations
  • Faking a case of illness
  • Violation of the duty to report and prove illness
  • Private unauthorized use of the Internet
  • Sexual harassment

We are using the example of tardiness here:

In the past few days you have been repeatedly late. The exact dates are XX.XX.20XX, on which you were late at X:XX (instead of X:XX), XX.XX.20XX on which you were late at X:XX (XX minutes late) and XX.XX.20XX on which you were also more than XX minutes late and did not show up until X:XX. Witnesses for this are Mr. …, Ms. … and Ms. … .

We have already pointed out to you with the warnings of XX.XX.20XX and XX.XX.20XX that such behavior is unacceptable, it disrupts the operational process in the long term, as well as damages the work ethic in our company and therefore makes your continued employment impossible.

Explain their compensation and benefits going forward

You should continue the termination letter by explaining outstanding employee benefits, including the salary owed and when the last paycheck will be sent.

Payment for your [remaining benefits: accumulated sick leave, PTO, vacation, etc.] will be included in your final paycheck which you will receive on your regular payday. You will be sent a letter by mail outlining the status of your benefits.

Notify them of company property they need to return

If the employee has used company equipment, you must also put in writing exactly what and when/where they must return it.

We would like to receive your office keys and laptop at the front desk on your leaving day.

Remind them of signed agreements

At the end of the letter, you should include a reminder of any signed agreements the employee made while at your company.

Please be reminded that you have signed [confidentiality/non-solicitation agreement/other relevant policy].

Include HR contact information

Do not forget to include contact details they can reach out to if they still have questions.

If you have any questions, please contact [HR department/contact name].

After the closing formula (with original signature), the letter can be printed and is ready to be sent!

Checklist termination of employment letter

❇️ Date of letter

❇️ Date of termination

❇️ Reason for termination

❇️ List of verbal and written warnings

❇️ Details of final paycheck, vacation pay, severance pay, and other benefits

❇️ List of items to be turned in before leaving

❇️ Reminder of agreements signed

❇️ Contact information

Sample termination letter to employee

A full termination letter example in case of termination with immediate effect:

May 1, 2021

Dear Mr. Smith,

This letter is to confirm that your employment with Corporation XY is terminated effective immediately.

We are under the obligation to terminate the existing working relationship with you due to the following cause:

In the past few days you have been repeatedly late. The exact dates are 04/22/2021, when you were late at 8:45 a.m. (instead of 8:00 a.m.), 04/23/2021, when you were late at 8:50 a.m. (50 minutes late), and 04/24/2021, when you were also more than 30 minutes late and did not show up until 8:35. Witnesses to this are Mr. Parker, Ms. Kim, and Ms. Moore.

We have already pointed out to you in the warnings of 03/01/2021 and 04/01/2021 that such behavior is unacceptable, it disrupts the operational process in the long term, as well as damages the work ethic in our company and therefore makes your continued employment impossible.

Payment for your remaining benefits will be included in your final paycheck which you will receive on your regular payday. You will be sent a letter by mail outlining the status of your benefits.

We would like to receive your office keys and laptop at the front desk on your leaving day.

Please be reminded that you have signed a confidentiality agreement.

If you have any questions, please contact the HR department.

Regards,

Jennifer Lee

What to avoid in a termination letter

Stop symbol --> What to avoid in a termination letter

🚫 Vague wording

You should avoid imprecise wording in the termination letter and instead provide specific information about the employment. In addition, you are advised to use the term “notice of termination” in the subject line and write that you are giving notice “with due notice”.

🚫 Failure to observe the notice period

Notice periods are usually specified in the employment contract. You must also observe a notice period in the case of a fixed-term employment contract. One exception, where you do not have to observe the notice period, is termination without notice. However, you must be able to prove an important reason for termination without notice.

🚫 No receipt of the notice

You will need an acknowledgement of receipt from your employee for your termination to be legal.

Use these sample termination letters to give notice to employees

You can choose a termination letter template that best suits your needs. Use it as a helpful tool when writing an employee termination letter.

Sample basic termination letter

[Date]

Notice of termination of your employment

Dear Mr. Smith,

I hereby terminate the employment agreement existing between us, based on the employment contract dated [insert date of employment agreement] with due notice as of [date], or alternatively as of the earliest possible date.

Yours sincerely

[Original signature of employer or authorized representative(s)]

Jennifer Lee

In the following termination letter template, we have an example on how to write a layoff letter:

Sample layoff termination letter

[Date]

Notice of termination of your employment

Dear Mr. Smith,

We are forced to terminate the employment agreement with you for operational reasons with effect from [date], observing the period of notice. The reason for this is that your job will be eliminated due to the closure of the entire department.

We regret this decision, which is unavoidable for us. We would like to thank you for your contribution to the success of our company and your hard work. We wish you, dear Mr. Smith, all the best with your next career step.

We will send you your employer’s reference in the course of the next few weeks. We will transfer any outstanding wage payments to your bank account at the end of this week.

Yours sincerely

[Original signature of employer or authorized representative(s)]

Jennifer Lee

Sample termination for cause letter

[Date]

Notice of termination of your employment

Dear Mr. Smith,

We hereby terminate the employment contract between you and us for reasons of conduct with effect from the next possible date. According to our calculation, this date is 07/01/2021. We see ourselves forced to take this step due to significant breaches of duty on your part.

On 05/13/2021 you again [description of breach of duty], although we have already made a similar misconduct the subject of a warning on 04/30/2021 and have pointed out to you the consequences of a repeated breach of duty.

You can expect a separate benefits status letter outlining the status of your benefits upon termination.

We received your office keys and company-owned laptop at the termination conference.

Please let us know if we can assist you during the transition.

Yours sincerely

[Original signature of employer or authorized representative(s)]

Jennifer Lee

Understanding termination for cause

Termination for cause shall be deemed to have occurred if facts exist which, taking into account all circumstances and weighing the interests of both contracting parties, make it unreasonable for the terminating party to continue the contractual relationship.

A distinction must be made between internal and external circumstances. From the employer’s point of view, it is advisable to refer to internal reasons for reasons of clarity.

Internal reasons:

  • Rationalization measures
  • Conversion of production or relocation of production abroad
  • Closure of a plant or part of a plant
  • Merging of operational areas
  • Permanent reduction of the workforce

External reasons:

  • Loss of orders or general sales difficulties
  • Decline in sales
  • Loss of third-party funding
  • Cancellation of budget funds

Termination for conduct-related reasons may also be justified. In particularly serious cases, extraordinary termination may also be declared if the employer cannot reasonably be expected to employ the employee until the expiry of the ordinary notice period.

Termination for personal reasons:

  • Illness is a reason for termination if there is a negative health prognosis and there is no alternative employment opportunity and there is no job suitable for the illness.
  • Lack of work permit and no perspective of obtaining it in the foreseeable future.
  • Lack of professional, physical or personal mental fitness.
  • Off-duty criminal acts, if they have a negative impact on the company.

Sample dismissal letter for poor performance

[Date]

Notice of termination of your employment

Dear Mr. Smith,

This letter confirms your dismissal from XY Company with immediate effect.

At [date] you violated your obligations under your employment contract as follows [describe the misconduct/bad performance in detail].

As a result of this breach of your employment contract obligations, there have been negative consequential effects.

[Detailed description of the negative consequences].

Yours sincerely

[Original signature of employer or authorized representative(s)]

Jennifer Lee

Sample termination letter for an employee who failed to adapt to change

If the employee rejects a change agreement, the employer can resort to a change notice. Contrary to a normal notice of termination, the employer often does not want to terminate the cooperation permanently, but to start a new employment agreement immediately after the notice of termination – albeit under changed conditions.

[Date]

Notice of change

Dear Mr. Smith,

We hereby terminate the employment between you and us dated [date] with due notice and in compliance with the applicable notice period as of the next possible date, [date].

At the same time, we offer you the opportunity to continue the employment as of [date] with changed conditions. We have attached a corresponding employment contract. In the following we have listed the associated changes for you once again: [List changes].

Please inform us in writing within a period of three weeks whether you agree with these changes and wish to start the new employment. If you decide not to accept the offer or if we do not receive a response from you within the aforementioned period, the termination will apply.

Yours sincerely

[Original signature of employer or authorized representative(s)]

Jennifer Lee

A guy looking at a Termination letter

Need to send a contract termination letter?

If you are faced with the task of writing an employee termination letter, our termination letter template(s) can help you fulfill this responsibility effectively. An employment termination can be a daunting task and is probably not at the top of your list when it comes to your professional duties. That being said, you should put just as much effort into giving notice as you do when hiring employees! Why? Because you are a professional and you know that your company’s reputation could be damaged if the termination process is not done in a professional manner. It is your duty to provide transparent reasons for terminating an employment contract and giving notice. In summary, there are three things you should keep in mind during the employment termination:

  • Be professional ✅
  • Be concise ✅
  • Be honest ✅

The ideal termination letter FAQ

How does the termination process work?

– Identify and record the problems.
– Provide coaching to employees to resolve the issue.
– Create a performance improvement plan.
– If there are no positive results: Terminate the employee.
– Have HR conduct a termination interview.

What does a professional termination look like?

Because of their serious consequences, notices of termination must be worded clearly and unambiguously. The intention to terminate an employment contract and the date on which it is to end must therefore be stated with absolute clarity in the termination letter.

What must be included in the notice?

Dear Mr. Smith, Taking into account the period of notice stipulated in the employment contract, we hereby terminate the employment with you with effect from [date]. We hereby terminate the employment contract concluded with you dated [date] with due notice as of [date].

DISCLAIMER
Termination process is subject to national law governing the employment relationship. Therefore specific national labour law provisions have to be considered. Please make sure to consult your legal advisor on any applicable national law provisions.
In addition, in some countries organizations representing workers’ interests (e.g. workers council, trade unions) have to be involved in the termination process. Also in such cases legal advice is highly recommended.