When you hire an employee, there’s a lot to do in onboarding…explaining company policies and practices, training for the position, and just getting everyone acquainted. But there’s an equal amount or more of actions that need to be taken when an employee leaves. This is so whether the individual quits or is terminated. Much of the actions for offboarding are common sense, but don’t overlook anything. The following are some areas to consider.
Recouping company equipment and access
Perhaps the first thing are the things that need to be reclaimed from a departing employee:
- Company equipment. These can be laptops, mobile phones, vehicles, tools, uniforms, or other items owned by the business that were used by the employee.
- Keys. If the employee had keys to get into the business or to access storage facilities, file cabinets, or other locked areas, you want the keys back. If access was made by keypads, codes need to be changed.
- Computer access. Immediately disable a departing employee’s access to company networks.
Protecting trade secrets
A company’s trade secrets, including customer lists, pricing, and formulas (e.g., Coca Cola’s formula and KFC’s recipe), are vital to its ongoing success. Trade secrets can be legally protected as long as reasonable measures are taken to keep them secret. Special steps are needed when an employee leave the company.
- Return company materials. If these materials, such as price lists, are confidential, they should not leave the premises.
- Confidentiality agreements. These are legally binding contracts that bar an employee from disclosing company secrets to others. Typically, companies have employees sign such agreements when they commence employment so they know not to make disclosures while employed. When an employee leaves, he or she needs to be reminded of having signed such an agreement and the consequences for breaching it. If an agreement wasn’t already signed, be sure a departing employee does so. LegalTemplates has a free employee non-disclosure agreement that you can customize for your business.
- IT security. As explained earlier, access to company data, emails, and other online confidential information should be prohibited.
- Legal steps. Be sure that employees know the company takes trade secrets seriously and will initiate any legal actions necessary to protect trade secrets, including lawsuits.
Handling HR
Small businesses may not have HR departments to handle offboarding. It usually falls to the owner or manager to handle outboarding, including explaining things to a departing employee.
- Issue a final paycheck. Observe federal and state laws regarding the timing of issuing a final paycheck and other payments owed (e.g., commissions).
- Fix severance pay. Severance pay is not required by law, unless there is an employment agreement to the contrary. But if there is a layoff, a company may choose to continue paying an employee for a period of time (e.g., 3 months; 6 months).
- Review what benefits are portable. Some employee benefits can go with the employee, such as a disability policy or life insurance (if the employee continues to pay the premiums) and Health Savings Accounts (HSAs).
- Determine what happens to health coverage. If there is employer coverage, the company may continue it for a time (depending on the reason for termination), such as 3 months. If the company has a group health plan and 20 or more employees, the company must offer COBRA coverage to allow continuation in the group plan (usually for up to 18 months). But know your state’s rules on COBRA, which may be stricter than federal COBRA. For example, Cal-COBRA applies to companies with as few as 2 employees.
- Advise about retirement plans. If the company has a 401(k) or other retirement plan, an employee who leave should be told the options for the plan (e.g., leave benefits in place; make a rollover to another company plan or IRA; take a distribution) and the tax consequences of these choices.
Practical matters
Now that the employee is gone, will a replacement be needed? Can other employees take up the slack? What does the departure do to company morale?
Final thought
It’s helpful to develop a written/online checklist of actions to follow when employees depart the company. This will ensure that everything that needs to be done will be done.
For additional information concerning employee agreements, see this list of blogs.