Terminating employment is increasingly risky for employers. Unfair dismissal applications are quick, cheap and easy to make. Added to this is the new field of adverse action applications, with the reverse onus on an employer to support a termination decision. Alongside this, termination is almost always taken personally and can create a strong drive for retribution against managers and employers. It’s a potent combination of firstly a wide variety of claims ex-employees can make, and secondly motivation.
The cost of defending claims can be significant in time, energy and money. And this is before you consider potential penalties imposed by a court, damages or harm to your organisation’s reputation.
As an alternative to one-sided dismissal, negotiating with an exiting employee and securing a release agreement can be a useful option for HR professionals to bear in mind.
It will only sometimes be suitable but when you need to do it, here are some steps to consider:
Identifying the right situation
If a good ongoing relationship is important, you may want employment to end on the best possible terms. A negotiated termination can provide this.
Performance issues can be difficult to establish and rely upon in unfair dismissal matters. You can reach a similar point after a misconduct investigation is completed without firm findings that misconduct has occurred. Regardless, you may have a strong indication that ongoing employment is not suitable. When this issue is raised with the person, often the feeling is pretty mutual. Those situations can also be good opportunities for a negotiated termination.
There may be other times where you’ve got no interest in negotiating with exiting employees. If an employee has stolen from the business, the last thing you’d do is offer more money on the way out. In other situations, there may be no benefit in going through an agreed termination process; the risk isn’t there to justify the effort.
Understand the entitlements, starting with the contract notice period. Also, judge the potential risk of the termination. What sorts of claims could flow if you decided to simply terminate, without agreement? You should have a handle on what the stakes are for your business and whether the risks indicate that you need to settle at a higher cost (or at any cost). You may reconsider termination entirely.
Lastly, put yourself in their shoes. If no one ever leaves without a redundancy payment, trying to get someone to settle for anything less might be a hard sell.
You should finally arrive at an amount of money to offer an employee in return for their agreement to the termination and for them to sign the release agreement.
When you raise the issue, support your decision with facts, and don’t talk down the reasons for the decision. The offer must be conditional on the employee signing a release agreement.
There are often other things that you can offer. The employee’s mobile phone (or its number), or perhaps a deal about their packaged car. If the car has to remain, can they retain it for a couple more weeks while they sort out another? Outplacement services are a common item on the table. The next step for the employee will be looking for work, so be upfront about what you can and can’t say to recruiters or referees.
Saving face is about maintaining a good self-image. If you can construct a face-saving exit for the employee you can neutralise the ill will that otherwise attaches to termination decisions. For an employee to resign, on better terms than they would have left otherwise, will save them face.
A release agreement or deed is the critical document that settles current claims and releases the organisation from the prospect of legal action (with the important exception of workers compensation issues, which cannot usually be wrapped up in these matters).
It’s important that you can do everything you say you will do. If your payroll system is creaky, give yourself plenty of time in which to process the payment. You may consider strengthening post-employment obligations on confidential information or even terms on restraints (non-competition).
It does take time and energy and it does cost some money, but it will also give you certainty in an environment of increasing employee legal claims. If done right, everyone can save some face and get on with the next step in their lives.
Source: HR Monthly, March 2012, p. 10