The Employee Termination Checklist For Accountants

by Mehdi BAH

Unfortunately, Employee Termination is an inevitable reality of owning a business. It can be the result of behavior or work performance or it could simply be because services are no longer needed despite having done outstanding work during his or her tenure with your company. Either way, it is essential to make sure that all the details are properly attended to.

Before the final decision is made, make sure that your decision is a legally sound one.

For example, you are not allowed to terminate an employee because of his age, disability, gender, race or religion or because she took family, medical or military leave or went to serve on a jury or vote. Whistle-blowers are also protected from being fired because of those actions. 

Are you an employer and thinking to create your own business, here are 30 Best Business and Micro-Jobs Ideas To Make Money and What You Should Do To Start A Business In 2020

Employee Termination Checklist:

Employee Termination Checklist

1. Final Paycheck 

Once an employee’s relationship with the company has been terminated, an immediate concern is the timing of the final paycheck.

The required timelines may differ substantially depending on the state regulations and the circumstances surrounding departure. 

While a number of states require that the final paycheck be issued “immediately;” note that this term is defined differently from state to state. Conversely, several states and the federal government have not passed laws relating to when final paychecks need to be paid, leaving this open to interpretation by the company and human resources department. However, all employees must be paid through their final date of service regardless of any other details that may influence the timing of the paycheck.

2. Severance Pay

There are no legal reasons on a federal level to issue severance pay other than if the employee and the company had signed an agreement stating that this would be issued in the case of termination.

However, some states do require it be paid in certain circumstances. 

Otherwise, severance pay is sometimes agreed upon at the time of the termination in order to help prevent that employee from working for a competing company or to have him waive any rights for future legal claims or access to unemployment compensation.

3. Unemployment Compensation

Barring a legally binding agreement stating otherwise, unemployment may be required to be paid if the employee was terminated through no fault of their own, as per Department of Labor regulations and in accordance with state law. 

4. Unused Vacation and Sick Days

In about half of the states, unused vacation time needs to be included in the employee’s final paycheck. However, unused sick days do not need to be paid to a departing employee. If an employee is terminated in a state that does not have a policy regulating payment of vacation days, then the company’s general policy or any agreements with staff take precedent.

5. COBRA

If your company consists of more than 20 employees and the terminated employee was part of a health insurance program and was not let go for “gross misconduct,” he will likely be eligible for continued coverage through COBRA or a state program that provides similar benefits. If your company is smaller than that, your state may still require health coverage be continued for a set period of time following his departure from the company. 

Typically, terminated or departing employees have up to 60 days to elect COBRA benefits and then an additional 45 days after the election to make the first premium payment due.

6. Vested Retirement Plans 

Vested profit-sharing, pension or 401(k) benefits need to also be addressed when an employee’s time with the company has come to an end. If she has contributed money into one or more of these plans, she has the right to receive those benefits, regardless of the reasons behind her termination. 

As often happens with 401(k) benefits, the value of those funds could decrease in value. However, defined benefit plans ensure that the employee’s retirement funds are protected. 

7. Reclaim Company Property

Make sure that all company-issued property is returned. These items can include things like cell phones, keys and laptops. If possible, it is best to have already planned out how this will be done prior to letting the employee know that her time with the company has been terminated. 

Make sure to do your due diligence and research the laws in your state as they relate to terminating a relationship with an employee as breaking these or related federal laws can result in serious consequences such as lawsuits and significant penalties.

Checklist Example

Here’s a visual checklist so you know what steps you have done and which you still need to do:

Employee Termination Checklist example
Employee Termination Checklist Visual

You might like

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. It's Okay Read More

DON’T MISS OUT!
Subscribe To Newsletter
Be the first to get latest updates and exclusive content straight to your email inbox.
Stay Updated
Give it a try, you can unsubscribe anytime.
close-link