Better Employee Management: Employee Separation

Better Employee Management: Eight Critical Areas for Small-Business Success

Employee Separation

Employers should consider the best practices below when an employee is terminated. It's also important to contact your local Department of Labor for any state-specific requirements.

Documentation

Depending on the reason for separation, you will need to have appropriate documentation for terminated employees. For employees who resign, you should receive a letter of resignation and schedule an exit interview. For discharged employees, or for any who have been laid off, employers should document this information in the employee's personnel file.

Exit Interviews

Some purposes of exit interviews are: to learn how the company can improve itself; to help employees feel good about the service they provided to the company; and perhaps to provide the opportunity for an employer to encourage the employee to stay under new circumstances, if desired. Employers may also use an exit interview documentation as evidence to discredit employee allegations of discrimination or unlawful conduct, if the employee did not disclose the allegations during the exit interview.

Notification to the Payroll and/or Human Resources Department(s)

Calculate final pay, which may include earned but unused vacation and personal pay, depending on state law or company policy. Checks with the local Department of Labor for more information about state laws regarding when final pay must be distributed and what compensation must be included.

Unemployment Details

Some states require that employees be given a separation notice when filing an unemployment claim. Contact your local unemployment office for state-specific requirements. 

Continuation of Group Health Insurance

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal requirement covering group health plans maintained by employers with 20 or more employees during 50 percent of the working days in the preceding calendar year. This law requires employers to offer employees (in certain circumstances) and qualified beneficiaries the option of continuing their medical insurance coverage. More information on COBRA and state health insurance continuation regulations are located in the Resource Library of the Paychex website at www.paychex.com/pdf/cobra.pdf.

Certification of Health Insurance Coverage

Title 1 of the Health Insurance Portability and Accountability act (HIPAA) requires plan administrators of medical insurance plans to furnish a certificate of creditable coverage automatically to: an individual entitled to elect COBRA continuation coverage, at a time no later than when notice is required to be provided for a qualifying even under COBRA; an individual who loses coverage under a group health plan and is not entitled to elect COBRA continuation coverage, within a reasonable time after coverage ceases; or an individual who elected COBRA continuation coverage, either within a reasonably time after the plan administrator learns that COBRA continuation coverage ceased or, if the payment of COBRA premiums ends. Certificated must be provided free of charge when requested by employees while they have health coverage or anytime within 24 months of coverage ending. Employees who know they will be leaving their place of employment may request the certificate in advance. 

Return of Employer Property

Upon termination, all employer-owned property should be returned to the employer.

Request for Employee Reference Information

Supervisors should refer all inquiries concerning requests for employee information to the member of management designated to handle such requests.

Severance Pay

Providing some type of severance pay at termination is a fringe benefit that an employer may offer to terminated employees. Severance pay is sometimes given in return for signing a waiver form relinquishing an employee's right to bring a lawsuit against a former employer. Employers should consult with legal counsel when considering severance pay and/or waivers. There are also state laws regarding layoffs and/or plant closings that may require severance-pay packages. 

This list is not all-inclusive and will depend on specific state laws as well as company policies and benefit packages.

Have a question about employee management? Connect with a SCORE mentor online or in your community today!

 

Additional employee management tools:
Payroll | Employee Communications | Benefits | Workplace Safety and Loss Prevention | Compliance | Interviewing and Hiring | Employee Motivation and Development | Employee Separation

About the Author

Paychex logoPaychex is committed to providing businesses the freedom to succeed. We do this by offering products and services that help clients do what they do best – run their business. From calculating payroll and filing tax payments to administering retirement plans and workers' compensation, Paychex gives its clients relief from administrative hassles so they can focus on their bottom line. For resources to help you start, grow, and manage your business, visit www.buildmybiz.com.