Most employers prepare for an employee’s first day, but how many prepare for the last? While big firms typically have procedures in place for guiding employee termination, not every employer has a professional guiding the exit process. In order to tie up loose ends and make sure you and your employee both have what you need to transition through their resignation smoothly, consider preparing with this checklist:
1. Wish them well
So your employee is leaving – you may not have expected the resignation, but once you get the news, take it like a champ. Instead of falling to pieces, congratulate him or her on their new position and focus on making the best use of their remaining time. Find out what their last day will be and decide how best to communicate the departure to the rest of your staff.
If the exiting employee is handling her resignation professionally, then let him or her make the announcement to their colleagues. Team morale is important, and you want to make sure the resignation news is delivered in a way that honors their service.
2. Create a transition plan
During the interim, enlist their help in creating a transition plan that prepares your existing staff to handle their duties until you can find a replacement. Have them make a list of everything they’re currently working on, and discuss any outstanding projects they have in the works. Decide what that they should finish prior to leaving, and figure out together how to split their responsibilities among your staff, whether it means splitting duties between people or having an employee shadow them.
3. Square away time off
Squaring away time off is important. Has the employee accrued any vacation time, sick time, and/or personal leave? If so, this is where your HR policy manual should come in handy.
“A company should ideally outline in their HR policy manual and employment agreements provisions around termination payout,” says Susan Power, a Certified Human Resources Leader and Owner and CEO of Higher Talent Inc. Some states enforce that it is the employer’s responsibility to pay out accrued vacation depending on its own policies and practices.
According to Charles Krugel, a management-side labor and employment lawyer & HR counselor, there are no federal laws concerning the payout of accrued PTO, and the field is mostly regulated by state and local law. “Generally speaking most states take this approach: If the employee earns it then it’s something they’re entitled to even when they leave, thus the payout. Some states permit companies to have a use it or lose it rule.” The “use it or lose it” rule often comes with its own set of terms.
According to Michael S. Gottlieb of Momentum Law Group, “The law (in Maryland) provides that if the employer has a policy of use it or lose it at the termination of employment and that policy is communicated to the employee at the start of their employment relationship, then the employer doesn’t have to pay it. If, however, either of those conditions isn’t met, then the employer will have to pay out the unused PTO.”
If you decide to cash out, Attorney Robin Solomon, a partner of Ivins, Phillips & Barker’s Employee Benefits practice, advises that “The cashout is paid as additional wages and reported on Form W2. If paid at termination, it is typically included in the employee’s final paycheck.”
4. Record hours through to their last day
If the exiting employee is non-exempt, it is your employer’s responsibility to continue to keep records of their time worked up until their very last day on the job. Federal law requires you to retain specific records containing timekeeping data and payroll information. According to the Department of Labor, “Records on which wage computations are based should be retained for two years, i.e., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages.” See our article on meeting recordkeeping requirements for more details.
5. Think about post-pay
If your employee isn’t voluntarily separating from the company, you’ll want to consider how to treat attempts to recover post-pay.
“Determine whether you will contest any application for unemployment benefits, realizing that it is very difficult to prove that the employee is not eligible for benefits absent some form of misconduct,” says Richard Meneghello, a partner at Fisher & Phillips Attorney at Law. “Figure out whether it is worthwhile to consider a severance agreement that will provide an amount of money in exchange for a complete legal release.”
A legal release is a contractual agreement in which an employee waives their right to sue the company over their termination in exchange for some type of benefit, like severance pay. Adds Scott Behren, Attorney and Founder of the Behren Law Firm, “Severance to pay is not required in many states but good to buy off any possible lawsuits down the road.”
6. Settle what’s owed
If the exiting employee owes the company any cash, now is the time to collect.
According to Attorney Robin Solomon, “An employer generally should determine any necessary deductions BEFORE the employee’s final paycheck. These deductions might include reimbursement for expenses, such as training costs or moving costs, that were explicitly advanced by the employer to the employee. Before deducting these amounts from a final paycheck, however, employers should check with counsel as to whether state law could limit their ability to withhold from the final paycheck.”
Likewise, you might owe them money. Make sure to pay out accrued PTO, salary or commissions or wages, and turnover of company property advises Attorney Scott Behren. We’ll discuss final pay and recovering property later on in the article.
7. Conduct an exit interview
Treat your employee’s separation from the company as an opportunity to obtain feedback on their time working for the company. According to Angela Reddock, Employment Law Attorney and Mediator at the Reddock Law Group of Los Angeles, the exit interview can be a formal or informal conversation or an exit document that the employee completes.
“Not surprisingly, employees often are willing to share more information about their experience of working with a company when they are exiting than when they are actively employed. The exit interview provides the employer an opportunity to learn what works well at the company and what does not work well, along with learning about any potential legal or other risk management issues on the rise.”
Says Dianne Crampton, Team Development Coach and Founder of TIGERS Success Series, if you’re taking on the role of HR, make sure the employee has what they need from the company before they exit.
“Make time to review the paperwork and answer any questions related to the paperwork including health insurance transfer procedures, benefits, letters of recommendation, recommendation points of contact, opportunities to freelance and instructions on how to apply for future freelance positions and outplacement benefits if those apply.”
8. Recover company property
Another recommended action for the exit process is to recover company property. “Collect any items that belong to the employer such as keys, laptops, and identification badges,” says Reddock. “Additionally, terminate the employee’s email address and voicemail extensions and/or place a message on the systems advising individuals of who to contact in the employee’s absence.”
Adds Charles Krugel, all company property should be inventoried and returned, “e.g., keys, data, documents, manuals, equipment, phones, etc. All company passwords and usernames for any online accounts should be checked, e.g., LinkedIn, Facebook, company intranet, etc. The company may want to have a checklist of all the property to be inventoried and returned, and may want written acknowledgment of their return from the employee.”
9. Deliver their final pay
The rules on delivering the exiting employee’s final paycheck are very specific, and according to Reddock, the biggest mistake employers make when an employee resigns is not paying the employee his or her final payment on time.
“Following the final pay requirements is important because failure to do so could expose the employer to penalties and interests up to 30 days of the employees pay. In California where I practice, the California wage and hour laws require an employer to pay the employee his or her earned wages through the date of resignation, along with any accrued vacation pay at the time of the employee’s exit. If the employee provides advance notice of his or her resignation, the employer must be prepared to pay the employee his or her final pay on the day of resignation. If the employee does not provide advance notice of his or her resignation, the employer then has 72 hours to pay the employee his or her final pay.”
Additionally, included within final pay should be accrued and unused paid time off and outstanding expenses, commissions or bonuses, says Krugel.
10. End on a positive note
Finish your employee’s exit on a positive note. This can be done with a wish you well gesture like an event or lunch to thank the employee for their service, says Reddock. “Even when an employee is exiting, the exit provides the employer an opportunity to show goodwill for exiting employees and to create lifelong supporters of the company.”
If the exiting employee was a valued contributor to the company, Crampton suggests inviting the employee to participate in future opportunities with the company.
“Go over your ‘boomerang program’ if this applies. We call freelancing opportunities and invitations to return to the company boomerang. There are times when people leave companies to return later after additional skills and experiences are learned. This is a key strategy to sever employment in a way that keeps your company in a favorable light with talented employees who leave for more opportunity. Severance does not need to be adversarial and there are many benefits that come from offering a boomerang program in today’s work climate.”
Saying goodbye to an employee can be difficult, but you can help them end their employment professionally and respectfully by shaping the exit process using the ten steps listed in this guide.