To maintain an environment that supports employee satisfaction and engagement, organizations must try to ensure that good performers want to stay with the organization and that employees whose performance is chronically low are encouraged – or forced – to leave. Both of these challenges involve employee turnover, that is, employees leaving the organization. When the organization initiates the turnover, the result is involuntary turnover. Examples include terminating an employee for theft or laying off employees during a downturn. Most organization use the word termination to refer only to a discharge related to a discipline problem, but some organizations call any involuntary turnover, a termination.
When the employees initiate the turnover, it is voluntary turnover. Employees may leave to retire or to take a job with a different organization, particularly in competitive labor markets when employees have many options should they become unhappy with their current job or employer.
In general, organizations try to avoid the need for involuntary turnover and to minimize voluntary turnover, especially among top performers. Effective human resource management can help the organization minimize both kinds of turnover, as well as carry it out effectively when necessary. Despite a company’s best efforts at selection, training and compensation, some employees will fail to meet expectations or will violate company policies. When this happens organizations need to apply a discipline program that might ultimately lead to discharging the individual.
For a number of reasons, discharging employees can be a very difficult but potentially important way to maintain a high performance and engaging work culture. The decision also has legal aspects that can affect the organization. Historically, if the organization and employee do not have a specific employment contract, the employer or employee may end the employment relationship at any time.
Employers have a right to terminate workers for reasons other than for “just cause”, however they must provide notice, termination pay, or severance pay as prescribed in the relevant employment/ labor standards legislation.
Termination pay is a lump sum payment equal to the regular wages for a regular work week that an employee would have earned during the notice period.
Severance Pay is a compensation that recognizes the employee's years of service and compensates the employee for loss of job related earnings. Employers cannot avoid paying termination or severance pay by attempting to force an employee to resign.
Constructive Dismissal occurs when the employer makes a signifiacnt change to a worker's condition of employment. Examples may include changing working hours, authority, travel requirements, etc.