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How to Fire an Employee and Not Pay For the Unemployment Claim

Firing an employee can be a stressful situation for a small business owner. It can also be a very big disaster for a small business’ finances if handled improperly. This article pertains to firing an employee for cause; that is, a deliberate action or pattern that is against the company’s best interests.

In many states, an employee fired without cause is eligible for unemployment insurance compensation that is paid out of the business’ contributions to an unemployment compensation fund. If there are insufficient contributions, the business is billed for the unemployment costs. For business owners, this probably seems unfair and unreasonable. It is true that unemployment laws in many states strongly penalize business for letting employees go.

To avoid the problem of a business assuming the burden of unemployment compensation, make sure you establish a strong case that the employee was fired for cause. Do not, of course, change the facts and lie; this will only make matters worse.

Have Clear Written and Signed Policies

Make sure that your employees have a clear understanding of their responsibilities and boundaries. This includes a job description, a strong training program, information about confidentiality, use of company property and resources, contact and interaction with clients and suppliers and any harassment-related issues (i.e., sexual, ethnic, religious, etc.). If your work rules are not clear, you will have a more difficult time proving cause.

Document Violations

It is very important to document violations of work rules and policies soon after they occur. A verbal warning might be the first step depending on the nature of the infraction. The business owner should keep notes of the meeting. A written warning, again, depending on the severity of the infraction, is the next step. The written warning should reviewed with the employee and then a signed copy of the warning should be retained by the business owner.

Many companies do not use monitoring software on their computers. This is a big mistake. You need to know if your employees are spending countless hours sending personal email or visiting non-work related website. You also need to know if they are transferring sensitive company information through your computers. The best practices for monitoring work computers include informing employees that the computer is being monitored and giving them an acceptable use policy.

Termination Meeting

Many business owners dread the termination meeting for good reasons. Follow these steps to make the process more professional and less stressful:

1. Draft a termination letter explaining the reasons for termination. Keep it simple and refer only to past violations of company policy.

2. While there are debates about either day, Fridays or Mondays seem to be best.

3. Have a witness if you expect any controversy.

4. Keep the meeting short and to the point.

5. Have the employee turn over any keys or passes immediately.

6. Give the employee a few minutes to collect any personal effects from his or her work area. Make sure this time is monitored. Have the employee leave immediately after collecting personal effects.

7. Change passwords, security codes and door locks immediately.

Dealing with Unemployment

Your ex-employee has a right to file for unemployment depending on the laws of your state. Again, depending on your state, you might be on the hook for unemployment costs if you don’t establish cause. Make sure that you respond promptly to any inquiries from the unemployment office, and by all means tell the truth. This is where having clear written policies, documented violations of the policies and a termination letter signed by the employee is essential. With all the proper documentation your business is unlikely to be responsible for paying for your ex-employee’s unemployment insurance.


About the Author:

Kona Impact provides Hawaii web design services. We offer a wide range of design and online marketing solutions. See our full offerings online at

Thane Johnson has been involved in web design and internet marketing since the late 1990s. He has a M.B.A in e-business and has an extensive background in print and online publishing and marketing. He lives on Hawaii Island.

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Reader Comments (5)

I am a locksmith and have been called out to hundreds or places where the company fired someone, they got back in as the company did not change the locks or codes on alarms, you must do this straight away.
September 2, 2010 | Unregistered CommenterDan Walsh
Very informative and helpful post. It really is stressful to fire someone, but sometimes we need to in order to help improve the company/business. Visit this blog if you want to know who are and who are not eligible for benefits: I hope it'll add to what you already know.
November 21, 2010 | Unregistered CommenterNatalie Loopbaanadvies
Hi , I was just browsing through the net Searching for some information and came across your blog.
I am impressed by the info that you have on this blog. It shows how well you understand this topic. Your website is beautifully decorated and easily navigated.

I have enjoyed visiting this site today and hope to visit many more times in the future.It was very informative and I also dig the way you write! Keep it up and I’ll be back to read more in the future. Amazing skills!

Looking forward to reading more. Great blog article.Thanks Again. Will read on
March 19, 2011 | Unregistered CommenterMaster0ms
Great information thank you!
July 27, 2011 | Unregistered CommenterJanet
I was just terminated from the grocery business. Although, the company I worked for made many mistakes when they terminated me.

1.) They violated their own termination policy.
2.) I was given a written warning 10 months ago but they did not give me the 2nd written warning that determines possible termination from the company.
3.) I was terminated illegally. I was not presented with a termination document that I'm suppose to sign.
4.) There was NO physical termination meeting. Instead the manager of the store called me on the phone, which shows he has the compassion and class of a box of rocks.
5.) During the no class phone call that the company is letting me go, after 2 years, I wasn't asked for company property such as entry keys, employer clothing, passwords, equipment used in my employment there.
6.) Upon being hired, I had to sign all kinds of paper work. But, when they terminated me, I didn't sign anything.

What pisses me off the most is that the Supervisor CALLED me on the phone instead of asking me to come to his office to terminate me legally and complete an Employment Ending Checklist.
July 25, 2013 | Unregistered CommenterEric

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