Things you need to know about Employee Termination Letter due to Closure of the Business (but not resulting from serious business losses).
1. What is an Employee Termination Letter?
Employees in the Philippines enjoy security of tenure which means that an employee can be dismissed only: (a) for causes provided by law; and (b) after due process is observed.
Employers can dismiss an employee based only on just and authorized causes. Just causes are based on acts attributable to an employee’s own wrongful actions or negligence (i.e. insubordination, habitual tardiness). Authorized causes refer to lawful grounds for termination which do not arise from the employee’s fault or negligence (i.e. closure of the business, retrenchment to prevent losses). On the other hand, due process refers to the employee’s right to be informed of the reason for his dismissal and, in case of just cases, an opportunity to defend himself.
An Employee Termination Letter helps satisfy both of the above requirements by informing the employee that his employment is being terminated and the reason for the same. It also includes other details of the termination such as the date when the termination will be effective and the amount of separation pay the employee will receive.
2. When do you need an Employee Termination Letter?
You need an Employee Termination Letter if you intend to terminate your employee. There are many lawful reasons for terminating an employee but this letter is based on the business closing for business reasons (and not due to serious business losses). If you are using another just or authorized cause (i.e. closing the business due to serious business losses) to terminate the employee, please use the appropriate termination letter on Legal Tree.
The letter also serves as a written record of the employee’s termination which may become necessary later on if the employee questions the legality of his dismissal. Before terminating an employee it is important to review the employment contract, employee handbook and any other HR policy to determine the requirements and procedure for terminating an employee. These precautions will help avoid allegations of wrongful termination down the line.
3. What information do you need to create your Employee Termination Letter?
To create your Employee Termination Letter you’ll need the following minimum information:
- The employee’s name and address
- The employer’s name and representative who will sign the termination letter
- The date when the employee’s termination will be effective
- The manner of computing the employee’s separation pay