Termination letters: Definition, example, and how to write one

A well-crafted termination letter provides your company with legal protection while supporting an offboarding process for departing employees. Managing distributed and global teams can be complex, and laws around terminating an employee vary. That’s why it’s important to know how to create an effective letter—no matter where your team is based. 

In this article, you’ll learn what a termination letter is, how to write one step-by-step, and how to create a customizable template you can use. 

What is a termination letter?

A termination letter, also known as a separation notice or letter of dismissal, is a document an employer issues to formalize termination of employment. It serves as the official notice of termination that includes the effective date for the end of the relationship, the reason for termination, and other important offboarding details. 

This letter often includes final paycheck details and severance package information. Employers can use it for various reasons, including to mark termination for cause, without cause, or the end of an employment contract. 

Why is a termination letter important?

A clear and concise termination letter is important from legal, compliance, and employee relations perspectives: 

• Legal safeguarding: This letter is a formal communication that relays the terms of the dismissal in compliance with company policy, the original employment contract, and local labor laws. Regulations around terminations vary by country or region, but a trusted partner like Oyster can help manage offboarding with localized support and on-the-ground expertise. 
• Documentation for future reference: The termination letter functions as an official record for People Ops teams and the terminated employee in case of future issues or disputes. 
• Clear communication of final arrangements: The letter typically puts in writing final paycheck and benefits details, severance pay information (if applicable), and next steps so the employer and employee are on the same page, decreasing the likelihood of future legal or other issues. 
• Protecting the employer brand: A clear, compassionate, and professional termination letter shows respect and transparency, protecting the company’s reputation and helping to minimize negative reviews on job and networking sites such as Glassdoor or LinkedIn. 

How to write a termination letter: 6 things to include 

An effective termination letter clearly communicates your intentions while staying in line with company policies and showing respect for the departing employee. 

A termination letter typically includes the following: 

1. Employee and employer details: List the employee’s full name, job title, and other identifying information, alongside your company name and HR or People contact. Include your company name, location, and HR contact details. Instruct the terminated employee who to contact with questions or concerns. 
2. Effective date of termination: Indicate the termination effective date, which is important for payroll and legal departments. 
3. Reason for termination: Note the reason for the employee termination, such as misconduct or termination for cause. Include sufficient details to protect your company against future litigation. 
4. Final compensation and benefits: Outline the next steps, including timing of the final paycheck, what happens to any unused paid time off, and any details regarding severance pay and benefits (such as health insurance continuation guidance). 
5. Return of company property: List items the terminated employee must return (such as laptop, keys, or badge) and due dates for their return.
6. Relevant legal obligations or agreements: Remind the employee of legally binding agreements they must abide by. Review ongoing obligations such as non-disclosure agreements or non-compete clauses. Take care to follow all local labor laws and regulations.

Termination letter examples

While details vary based on aspects such as local labor laws and reasons for the termination, these termination letter templates can serve as starting points:

Termination letter for poor performance

[Employee’s Full Name]

[Employee Address]

[Job Title]

[Department]

[Date]

Subject: Termination Letter for Performance Issues

Dear [Employee Name],

This letter formally notifies you that your employment with [Company Name] ends effective [Effective Date]. Our decision stems from your failure to meet performance standards, as per your role’s job description and employment contract, after numerous attempts to address our concerns. 

In summary, we discussed the following concerns with you and attempted to resolve them through formal feedback channels and written warnings on the dates indicated:

• [Issue One] [Feedback/Warning Dates]
• [Issue Two] [Feedback/Warning Dates]

Your final paycheck includes salary through [Effective Date], including unpaid vacation days, personal time off, and sick leave. You will receive separate communication regarding continuation of your health insurance benefits. 

Please return all company property in your possession: [List Items] by [Date].

Refer to your employment contract for details about the confidentiality agreement you signed when hired. 

If you have any questions or concerns, please contact [HR Contact Information]. 

Sincerely, 

[Name]

[Title]

Termination letter for layoffs or restructuring

[Employee’s Full Name]

[Employee Address]

[Job Title]

[Department]

[Date]

Subject: Notice of Termination of Employment

Dear [Employee Name],

This letter formally notifies you that your employment with [Company Name] ends effective [Effective Date]. We made this decision due to a company restructuring that requires layoffs in your department. We would like to thank you for your time with the company and point out that this decision has nothing to do with your performance. 

Your final paycheck includes salary through [Effective Date], including unpaid vacation days, personal time off, and sick leave. You will receive separate communication regarding continuation of your health insurance benefits. 

Please return all company property in your possession: [List Items] by [Date].

Refer to your employment contract for details about the confidentiality agreement you signed when hired. 

If you have any questions or concerns, please contact [HR Contact Information]. 

Sincerely, 

[Name]

[Title]

Termination letter for end of contract

[Employee’s Full Name]

[Employee Address]

[Job Title]

[Department]

[Date]

Subject: Notice of End of Employment Contract

This letter formally notifies you that your employment with [Company Name] ends effective [Effective Date], due to the end of your employment contract. 

Your final paycheck includes salary through [Effective Date], including unpaid vacation days, personal time off, and sick leave. You will receive separate communication regarding continuation of your health insurance benefits. 

Please return all company property in your possession [List Items] by [Date].

Refer to your employment contract for details about the confidentiality agreement you signed when hired.

We would like to thank you for your contributions and, if the opportunity arises, would like to work with you again. We are also happy to provide a reference for future opportunities outside of our organization. 

If you have any questions or concerns, please contact [HR Contact Information]. 

Sincerely, 

[Name]

[Title]

Handle cross-border offboarding confidently with Oyster

The termination letter functions as a formal document to help prevent legal issues with terminated employees and ensure compliance with local labor authorities. It’s important to clearly and concisely relay the reason for termination when you decide to part ways with an employee.

A sound termination letter also reflects compassion and shows respect in a professional nod to employees and as a way to maintain your company’s reputation. 

Oyster can help you simplify offboarding worldwide by serving as your Employer of Record and ensuring global compliance. See how Oyster’s all-in-one platform can help you manage a global team.