Letting an Employee or Contractor Go: Best Practices

Photo by charlesdeluvio on Unsplash

Letting an employee or contractor go is one of the hardest parts of being a manager or small business owner. When you terminate someone, regardless of how justified you may be, it invariably causes them pain, hurts their livelihood, and may impact their family. Approach the process with compassion and care for the best results: You want to make the blow palatable, avoid lawsuits, and have peace of mind when everything’s said and done.

This mini-guide walks you through the termination process, covering standard practices and offering suggestions for making it all go smoother: 

Knowing when it’s time to pull the trigger

First, you need to make sure letting them go is the right decision. An executive at a leading software company looks at three signs before pulling the plug: 

  • Team morale: A bad apple spoils the bunch. Check if an employee’s presence is affecting team morale negatively and hurting team performance.   
  • Potential: Not every person has the potential to be great at the job they’re doing or be a valuable asset to the company. See if an employee is performing up to par. 
  • Judgment: Some people consistently make bad logical judgments and poor ethical choices. If an employee carries this pattern, they may be a liability.  

Besides these behavioral indicators, you should also look at their adherence to the contract. If a contractor or employee doesn’t fulfill the services specified in the contract you signed together, they may have breached the contract and be liable for paying you damages. You may be justified in letting them go. Be advised that to get compensated for the breach, the contract must be legally binding and enforceable.

Ensure you’re legally in the clear

When you hire an employee on an “at-will” basis, you can fire an employee at any time for any reason, provided you’re not being discriminatory, have a “just cause,” and don’t violate public policy. Most states in the US are at-will employers. You don’t need to provide notices or warnings, according to HRM America. However, if you’ve signed a contract, then the contract’s terms and conditions apply. For instance, you may be required to give a worker time to improve their performance or two weeks’ notice before terminating their contract.

Even when you’re terminating at-will employees, it’s advisable you carefully document the process. This gives you evidence of just cause and protects you from lawsuits. It’s also advisable you apply the same termination criteria to all employees to avoid problems. You should have a “company handbook” that documents this process. Hubspot covers everything important to include in one.

Steps to firing an employee

Here are the recommended steps to follow when firing an employee:

  • Check your handbook: Your handbook will include your termination-related policies that you need to comply with before moving forward.
  • Write them up: When a worker violates company policy, you should document the violation and ask your worker to acknowledge it. They should also be afforded an opportunity to improve.
  • Gather evidence: When you’re ready to fire someone, gather evidence like write-ups, documents, and interviews. You should also store this information for later retrieval.  
  • Have a factual conversation: If you’re ready to fire an employee, sit them down and have a careful conversation about the reason for termination. Be clear and brief.
  • Fulfill your obligations: Last, provide information about their benefits like COBRA, paycheck, unemployment options, insurance, and more.

Make a system to manage, organize, and store employee documents

Unless you have a dedicated HR department, you likely have to manage your employee’s termination personally. Having a system to manage, organize, and store employee-related documents can make it easier to stay on top of things. You can create digital PDF records of contracts and other important documents and merge them into a single file to keep everything together. This keeps every individual employee’s details in one place. If you need to merge PDFs online, you can use a free tool. After the PDF files have been combined, you can move individual pages around to get the records arranged as you want them.


Sometimes, despite your best intentions, tough calls need to be made. Be compassionate to make it easier on them and you. Having a well-documented process and a company handbook will make it go smoother, as will organizing your employees’ documents in PDF or similar. Lastly, following obligations, having a witness, and consulting with an expert can help you avoid legal trouble.

Ms. Reed created Gig Mine because she was inspired by the growth of the sharing economy and wanted to make it easier for entrepreneurial individuals like herself to find the gig opportunities in their areas.