Let’s be honest here, we’d much rather talk about hiring an employee than firing one. Talking about firing employees is an uncomfortable subject and one that most people try to skirt around rather than face head on.

But, as a business owner, you may one day find yourself in a position of needing to fire an employee. We’re not talking about layoffs here — where an employee (or employees) must be let go due to lack of work — instead, we’re talking about firing someone for non-performance. Your reasons for coming to this difficult decision may vary — an employee may not be performing up to your expectations or maybe that person isn’t the right fit within your company culture. Whatever the reason, it’s rarely an easy conclusion to reach

 

Firing shouldn’t come as a surprise

Before making your final decision, document everything and share that file with the employee. A firing shouldn’t come as a surprise to anyone. It’s not fair to the employee or to the success of your business if you look an employee in the eye and tell them that they’re doing a great job only to then turn around and write a laundry list of offences in their file.

This file is something that should take many weeks or months to build. It should include annual performance reviews, notations on issues or problems and the steps you and the employee took to resolve them and any other relevant.

This file provides the proof you need to make your case against the employee but even with this detailed file, it’s difficult to fire an employee ‘with cause’ (firing with no notice or pay in lieu of notice to the employee) in Canada. Meeting the ‘with cause’ threshold is difficult to prove in court (should a fired employee choose that route) and no business owner wants to be dragged through court. It’s simpler, then, to terminate ‘without cause’ and offer notice or pay in lieu. It’s typically much cheaper to pay out a modest package to the fired employee than it is to weave your way through the court system.

 

Law for severance pay serves as a minimum

Respect the law when it comes to paying severance, but remember that it serves as an absolute minimum.  When paying severance, consider:

  • How long has the employee worked for you? Are you getting rid of a long-term employee or a newer-hire?
  • How did the employee come to your company? Did you headhunt them from somewhere else?
  • What is the employee’s ability to find another job? Is he or she young and employable or close to retirement?

If you do decide to offer a payout above the minimum laid out in the Ontario Employment Standards Act, just like all the paperwork you drew up and completed when you hired the employee, make sure to draw up a release for the employee to sign in exchange for the severance being issued.

 

Finally, once you’ve thought through all the details and reached a final decision, don’t delay in pulling the trigger. Things aren’t likely to change by taking a wait-and-see approach. Call a meeting, prepare a brief script beforehand (and be ready with the answer to the inevitable question, ‘why?’) and deliver the news — preferably in person and in a discreet area of the office. Be honest but brief, and be clear that your decision is final.

Don’t miss our next blog on accounting software and how to get the useful reports you need to understand your business levers.

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