SMB HR: Terminating with a Return

Wednesday, July 28, 2010
Posted by Brawlin Melgar

Photo: Ted takes an early retirement with a good Termination Pay Package and no one got hurt.

by John Beagle

During periods of economic downturn, SMB employers cut employees. Sometimes as much as 50% of a staff may be cut. In many small businesses, cutting 1 or 2 people is cutting 10% or more of the total employees.

It's hard to let go of under-performing longer term employees. Often times longer term employees have expert authority in shorter term employees eyes. Sometimes longer term employees think they run the place. Unlike larger corporations, employers in SMB companies often are friends with and know their entire staff. Letting go of someone who has worked for 5 or more years is difficult, but often times, necessary.  

So how do you go about letting an under-performing senior employee go? The answer is Termination Pay. Yes you can pay employees to leave and reduce risks and costs. 

In a bad economy, it is either kill or be killed. If a SMB doesn't cut costs as revenues and margins decline, then they are out of business. When you terminate, you run the risk of resentful employees may post bad or misleading information about you our your company, they may send out email to all the employees that damage you our your company, they may even litigate to get more money!

With termination pay, you may leverage your position with the employee. Often times you may level with the employee that maybe now is a good time to part company.

Put together an out-the-door package including all kinds of pay, benefits and terminology.

There's sick pay, vacation pay, personal day pay, retro pay, bonus pay, advanced pay, what ever the employee has accumulated. Mention all this pay, total the pay and summarize for the employee. You may even consider paying until the end of the year, month, week as additional incitement to take a leave.

How long will you extend any benefits including health insurance or other insurance such as life. Retirement fund summary and future flows into the fund. Review all benefits stopping and continuing with end dates.

Calling it a layoff or early retirement is often the best way to handle these things.

"We needed a layoff so Ted volunteered to take an early retirement."

Help the employee save face with the other employees. Often times a more direct approach to a layoff of a senior employee is the best approach. Tell rather than let employee find out through the grapevine.

Saving Face
Saving face and enriching the employee is probably the best way to avoid lawsuits, bad email and social dis. Avoid getting slapped on Facebook, keep from being unlinked in Linkedin, read nice things when you Google your name and keep the 'left behind' employees well balanced by looking at termination pay as an investment. Your return on that investment is lower legal fees and a better, more productive work environment.

Other SMB article: 

A SMB Life Preserver in an Economic Storm