July 2011   
Employee Terminations 

Simple Steps to Reduce Anxiety


The new jobs report just came out and it was a huge disappointment. Many businesses are still struggling with rising costs, uncertain cash flow, and a lack of confidence in the future. Paring down labor costs has been, and continues to be, a primary tool for businesses to use in order to maintain any sort of profitability. The thought of letting someone go, however, can cause fear and anxiety in the mind of any business owner or manager.

There are two different kinds of terminations. One is when an otherwise capable and well performing employee needs to be laid off due to lack of work or lack of funds to pay that person. The second is when an employee is not performing their duties, not following procedures, or simply not meeting the expectations of their position. For many business owners and managers, the first scenario is much more difficult because the employee hasn't done anything wrong. In fact, they may have actually done an outstanding job, may have worked at the company for years, and may have done everything in their power to help the company succeed. Unfortunately, sometimes that's just not good enough. The business is struggling, and labor costs need to be reduced.

So where do you start with this type of termination? How do you tell someone that they are going to lose their job through no fault of their own? The answer is to be organized, be compassionate, and to follow through on the details. Here are some simple steps to keep in mind:

Step 1:  Prepare 

Sitting down with an employee to inform them that they are losing their job takes preparation.  There are a number of pieces of information that should be gathered, and a number of issues that should be thought through BEFORE the meeting begins.  For example, be prepared to answer the following questions:
  1. When will the employee receive his final pay check, and what time period will that check cover?
  2. Are any commission payments owed? 
  3. Will any severance payment be made? 
  4. What vacation time has the employee earned but not used yet? That time must be paid out in the final check as well.
  5. Are any expense reimbursements owed to the employee? 
  6. When will benefits end? Is the employee able to continue those benefits through COBRA or Illinois Continuation Coverage? How much will that coverage cost?
  7. Does the employee have any company property that must be returned? Cell phone? Laptop? Tools? Other?
  8. Does the employee have a company email address, access to the company network, access to company accounts, or any other secure access that needs to be shut off promptly?
  9. Does the employee have keys that need to be returned?  

Step 2:  Talk  


Getting the conversation started is the most difficult part. If business is down and money is tight, the employee is probably already aware of that. Spending a lot of time explaining details about the company's status or strategies or plans for restructuring doesn't do any good. Once you call them into your office and start talking about these things, they will know that something is up. Get to the point. Here is an outline of how the conversation could go:

  1. Summarize briefly the current business difficulties or expected changes. (ie. "Well Bob, I'm sure you know that business has been slow." or "As you've heard me talk about, my plan has been to start outsourcing function 'x' in order to reduce our costs.")  
  2. State in one clear sentence that "As a result, I have reached the decision that I need to lay you off effective today."
  3. Pause. Give the employee a moment to think, to react, to ask a question or two, to say something. Be empathetic. Listen.  Tell them that you have struggled with the decision. Tell them you're sorry that this has to happen.
  4. Continue with the details collected in Step 1 above. Explain. Be patient. Be clear. Answer questions.  
  5. Conclude by stating your commitment to assisting that employee in their future job search. Offer to write a letter of recommendation.   


Step 3: Follow up  


Following the meeting with your employee, be sure to follow through on all of the details discussed. An employer is required by law to pay all monies due to an employee immediately upon termination, or no later than the next regular pay date. It is also illegal to hold this money while you wait for company equipment to be returned. The former employee will likely file for Unemployment benefits, in which case you will receive a notice of claim in the mail. In a layoff situation, no response is needed to this notice. Provide a written letter of recommendation if you feel comfortable in doing so. If the employee's performance was mediocre, and you have nothing positive to say, you can still verify employment if contacted by a prospective employer. Simply confirm position held, dates of employment, and pay rate. Never say anything negative about the person or their performance.   



Laying off an employee is never easy. But, with the proper preparation, well thought out presentation, and thorough follow up, you can remove some of the anxiety that this event can cause.   


If you need assistance with a termination, have questions about the steps above, or have other complicating issues, please call me. I would welcome the opportunity to discuss it with you.


Enjoy your summer! 


Sandra Teague, SPHR
Advantage Employment, Inc.

FUTA Tax Rate Reduction 


The Federal Unemployment rate (FUTA) will change on July 1, 2011, from 6.2% to 6.0%. Most companies are eligible for a 5.4% credit, which reduces your effective FUTA rate from 0.8% to 0.6%. All of your FUTA liability gets reconciled when you file Form 940 at the end of the year. Advantage Employment has already incorporated these changes for our payroll clients. Be sure that your payroll processor has made the appropriate updates as well. 

Standard Mileage Rate Change


Effective July 1, 2011, through December 31, 2011, the standard rate to calculate deductible costs of operating an automobile for business use increases from $.51 to $.555 per mile. For more information, Click Here to view the IRS news article.


How HR Outsourcing Saves Money

In good times or bad, companies are always looking for ways to cut costs and function better, yet more efficiently. A key target area is employment. While wages and benefits should be maintained at competitive levels, the cost of administering employment can be reduced.  Here are just a few ways that Advantage Employment helps its clients:
  • Eliminate the internal cost of an HR administrator and outsource those duties for less.
  • Stop allocating high level executive time to handle sensitive or confidential HR issues. Focus on your business instead.
  • Stop paying an outside payroll provider steep rates for minimal do-it-yourself service.
  • Reduce your exposure to dangerous lawsuits by enlisting the help of HR professionals. Show your employees that policies are sound, and prevent trouble makers from taking advantage of a loosely run organization.
  • Reduce turnover in your staff by maximizing their understanding and utilization of the employee benefits that you already provide to them.
  • Increase employee loyalty by providing them a resource to solve any employment question or problem.
  • Don't lose a protestable unemployment claim. Each person who gets unemployment benefits who shouldn't can cost your company $4K to $6K in increased taxes each year.
  • Don't let workers comp claims malinger. Improper case management and lack of a return-to-work plan will increase the cost of the claim and increase your mod.
Things You Should Know
FUTA Tax Reduction - Effective July 1st
Standard Mileage Rate Changed by IRS
How HR Outsourcing Saves Money

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