Most business owners handle the dreaded task of terminating employees badly. The biggest mistake small-company owners make is terminating employees in a harsh, unkind and insensitive way. The manner in which employees are fired often dictates their feelings about being let go. And those feelings often fuel lawsuits. Right or wrong, if employees feel that they are being unfairly treated, they perceive it as grounds for a lawsuit.

The reason small-business owners often botch the termination process is because they’re winging it. Unlike midsize and large companies, they don’t have the luxury of human resource specialists to guide them through the process. They either say inappropriate things or fail to handle it expediently and professionally.

Here are seven tips that can take some of the angst and pain out of termination.

1. Think carefully about what to say. The bad news ought to be delivered quickly, professionally and sensitively. Then allow the terminated employee time to digest the information and respond. Encourage questions. To ensure that it goes smoothly, jot down notes beforehand so that important points are covered. A rehearsal wouldn’t be a bad idea.

2. Avoid a clinical approach. Many business owners and managers take a cold, clinical approach, fearing they’ll be sued for saying the wrong thing. Being too cautious makes business owners seem heartless. Don’t lose sight of what’s happening: Suddenly an employee is losing a weekly income that supports him and possibly a family, not to mention pays a mountain of bills that ensure a decent standard of living. In the space of 15 minutes a person is thrown into a tailspin. Don’t try to remove human emotions and feelings from the termination process. Business owners should flip the situation and put themselves in their employees’ shoes. That’s guaranteed to humanize the uncomfortable situation.

3. Be honest and direct. Don’t beat around the bush. Simply explain the reasons for termination. They can include production cutbacks due to drastically reduced revenues; violation of company policies (safety procedures, lateness, absenteeism) and failure to follow orders.
 
4. Do it privately. It can be done in the business owner’s office or a meeting or conference room. Avoid speaking to employees in their cubicles or offices.

5. Don’t let things get personal. It’s reasonable to assume that employees will be upset. Be prepared for an emotional reaction such as anger, hostility or disbelief.

6. Do not discuss other employees’ situations. The tough part about termination is deciding who goes and who remains. Naturally, terminated employees will immediately wonder which employees remained and why. And they might understandably ask about the status of other employees. If asked, politely respond that it’s not an issue that can be discussed. By talking about other employees, business owners enter a minefield, raising questions of fairness.

7. Part kindly: Help employees move on. No matter how diplomatically small-business owners terminate employees, it will always be a difficult process. Beyond doing it in a professional, thoughtful and elegant way, try to help employees make a smooth transition to new jobs. Try to give them at least two weeks’ notice so they can begin to put out feelers for new positions. If an employee’s work performance was above average or excellent, provide a letter of recommendation and assistance and guidance in finding a new job. It not only benefits employees, but it makes business owners feel better about themselves.

How to avoid lawsuits

Keep records and documentation of each employee’s employment record. It ought to have dates of performance reviews, detailed evaluations, promotions, pay raises and bonuses. Most important, there must be a concise explanation of the reasons for termination. The official record should only contain facts and dates, rather than supposition, interpretation or opinion.