Terminating an Employee Due to Downsizing

When you decide to downsize your business, you’re left with the unfortunate task of eliminating certain positions, forcing you to sometimes terminate an employee. While you probably never take joy in terminating an employee, doing so may be even more difficult when you’re forced to do it for reasons that don’t relate to the employee’s job performance. Tactfully dismissing the employee and helping her find new work helps smooth over the termination process.

  1. 1.

    Determine which employee to terminate. Look at the employee’s salary and his performance. Don’t fall into the trap of terminating the highest-paid employee, as she may also serve as one of your best-performing employees. If you need to cut salary to adhere to a new budget due to downsizing, terminate an employee who is paid a solid salary but who could also perform better.

  2. 2.

    Consider demoting the employee instead of terminating him. Demotions work in both your favor and the employee’s favor. The employee gets to keep a job, and you get to keep him on as part of your workforce. Demotions are common for companies that plan to downsize, but demotions only work if you have room for the employee in a new position.

  3. 3.

    Talk to the employee privately when you decide on who you’re terminating. Explain to the employee that business decisions have forced your hand and that you need to let him go.

  4. 4.

    Assure him that the termination is not due to performance issues and that you will gladly recommend him to other employers, if he writes you down as a reference.

  5. 5.

    Offer a severance package to the employee. If your offer is low and the employee feels you should compensate him for sick days or unused vacation days, prepare to negotiate a new offer.

  6. 6.

    Assist the employee with finding a new job. Suggest other business owners or hiring managers to consider the employee when they hire new workers.

  7. 7.

    Thank the employee for his commitment to the company and wish him luck in future endeavors. Provide the employee with documented evidence of his termination. Shake the employee's hand and ask him to pack his belongings. Escort the employee out of the building after he does so. Explain that the process conforms with the termination policies set forth by your company.