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Learn2 Terminate an Employee (continued)
Step 5: Design an exit package

Perhaps little more than a swift kick is in order, but a decent exit package may be more profitable to you at the end of the day. It can create goodwill and reduce the chance of litigation. And in some cases, it's the law. Consider the following:

Health insurance. If your company has at least 20 employees, the U.S. government legally requires you to offer fired employees COBRA coverage (that is, the option to continue their health benefits by paying for the same insurance that you, as their employer, had provided), unless the employee has engaged in "gross misconduct," which generally means illegal activity while on the job.

Vested retirement funds. You must pay retirement funds in full to workers who've met the minimum length of service to qualify, even if they've been fired. Again, it's federal law.

Unemployment benefits. Employers are required to notify employees (including terminated employees) of their right to file an unemployment claim. Posting notification in the office is generally sufficient. Employees who have been fired don't qualify, but employers have the burden of proof.

Severance pay. While not legally necessary, you might want to consider offering an employee a small financial cushion. Two weeks' worth of salary is a rule of thumb, though the amount can vary according to the situation.

If you do offer more than what's required by law in your area, consider asking the employee to return the favor by signing an agreement not to sue. Ask a lawyer to help you prepare such a document so it will stand up in court.

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Step 1: Be sure you're sure
Step 2: Be aware of potential problems
Step 3: Avoid illegal termination
Step 4: Build a case
Step 5: Design an exit package