Handling Separations Decently: When an Employee Has to Go

Why the way you part matters beyond the individual case

There are many reasons why an employee has to go: orders collapse, the work does not fit after long attempts, or a behavior is no longer acceptable. In each of these cases, owners often put off the decision for a long time, and when it is made, the conversation is short and awkward. Both are human, and both make the situation harder for everyone.

That raises one question: How does an owner part with an employee so that the separation is legally sound, humanly decent, and comprehensible to the remaining team? To answer it, I first clarify the most important terms, then present a model of fairness in separations, summarize what studies show, weigh two views, and describe the preparation, the conversation, and the time afterward. The legal notes are an orientation, not legal advice.

Dismissal, termination agreement, severance: the terms

A dismissal is a unilateral declaration ending an employment relationship. A termination agreement ends it by mutual consent, often combined with severance pay and an agreed end date. Severance pay is a payment to compensate for the loss of the job. In Germany there is no general statutory entitlement to it. It is usually agreed in order to avoid a legal dispute.

Under the German Dismissal Protection Act (Kündigungsschutzgesetz), the law distinguishes three grounds for dismissal. A person-related dismissal is based on circumstances in the person, such as a long-lasting illness with a poor prognosis. A conduct-related dismissal is based on misconduct, which as a rule must be preceded by a formal warning. An operational dismissal is based on the job ceasing to exist, for example because of a decline in orders, and requires a social selection among comparable employees.

The thinking model: three sides of fairness in a separation

Research on fairness in organizations distinguishes three kinds of fairness. Van Dierendonck and Jacobs (2012) describe them for separations as follows: distributive fairness concerns what is at the end, such as whether severance is adequate. Procedural fairness concerns the route: whether the selection follows consistent rules, without bias, with the possibility of correcting errors and of contributing one's own view. Interactional fairness concerns treatment: with what dignity and respect the news is delivered and how clearly it is explained.

The guide Conducting salary conversations uses the same three kinds for conversations about pay. In separations they carry particular weight, because the outcome is almost always unwelcome. If you cannot change the outcome, you have all the more influence over procedure and treatment.

An everyday analogy: anyone who fails an exam is disappointed. But whether they accept the grade depends heavily on whether the grading followed known criteria and whether the examiner explained the reasons. A poor grade with a comprehensible justification is easier to bear than a good grade nobody can explain.

The outcome of a dismissal can rarely be made friendly. The way there can.

What studies show about fair separations

In a meta-analysis, van Dierendonck and Jacobs (2012) evaluated 37 samples with a total of 11,256 people, both those dismissed and those who remained with the company. They found a clear positive relationship between perceived fairness and emotional commitment to the company in both groups. Three differences emerged.

• For those who stayed, procedural fairness counted more than distributive fairness. They observe how others are treated and draw conclusions about their own situation.
• In countries with a more individualistic culture, fairness weighed more heavily than in more collectivistic ones.
• Fairness mattered more when layoffs served profit maximization than when they were economically necessary.

Two further studies show what matters in the conversation. Mansour-Cole and Scott (1998) surveyed 217 research and development professionals before and after a workforce reduction. Those informed by their own manager experienced the procedure as fairer than those who learned of it another way. Skarlicki, Barclay, and Pugh (2008) found that good explanations dampened the retaliation tendencies of dismissed employees only if the employer had already been seen as having integrity before the dismissal. Explanations are therefore not a tool to be deployed at the last moment. Their effect depends on how one behaved beforehand.

The limits of these findings: most studies concern larger workforce reductions in companies, not an individual dismissal in a small business. The basic mechanisms, observation by the team and the importance of integrity, transfer well, however, because in a small business everyone sees what happens.

Two views: short and quick, or thorough and supported?

The first view recommends a short, clear conversation and a quick separation. Long explanations invite discussions that do not change the outcome. Garden leave from the day of the conversation protects customer relationships and business secrets and spares everyone a stressful period.

The second view recommends a thorough, supported approach. Giving time for questions, helping with the search for a new job, and arranging a dignified farewell in front of the team protects the dignity of the person affected and the trust of those who stay.

I consider both views correct, but for different parts of the separation. The conversation itself should be short and clear: the outcome comes first, the decision is not renegotiated. What comes afterward should be thorough and supported: a second conversation on the formalities, the reference, and questions, help with finding a new job, and a farewell nobody on the team later shakes their head about.

The legal framework in outline

The following points give an overview of what an owner in Germany should know before a dismissal. They do not replace advice from a specialist employment lawyer, which is advisable before any dismissal.

• Written form: dismissal and termination agreement must be in writing with a handwritten signature (Section 623 of the German Civil Code, BGB). An email or message is not sufficient.
• Notice periods: the basic period is four weeks to the 15th or the end of the month; during a probation period of at most six months, two weeks. For dismissals by the employer, it increases with length of service (Section 622 BGB).
• Dismissal Protection Act: it generally applies if the business has more than ten employees and the employment has lasted longer than six months. The dismissal then needs a person-related, conduct-related, or operational reason.
• Works council: if there is one, it must be consulted before every dismissal (Section 102 of the Works Constitution Act).
• Special protection: special rules, and in some cases approval requirements from authorities, apply to pregnant employees, employees on parental leave, severely disabled people, and works council members.
• Deadline for legal action: anyone wishing to challenge a dismissal in court must do so within three weeks of receiving it (Section 4 of the Dismissal Protection Act).
• Reference: employees are entitled to a written employment reference.

Preparation and conversation: a seven-step process

A separation does not begin with the conversation. With performance or conduct problems, it begins with clear feedback months earlier. If you have never said what is wrong, you surprise the employee, and surprise is almost always experienced as unfair. What regular, specific feedback looks like is described in the guide Feedback in the sales team.

1. Review the decision

   Check reason, notice period, form, and possible special rules with a specialist lawyer. Clarify whether a termination agreement with severance is an option.

2. Prepare the conversation

   Write down the core message in two sentences. Have the dismissal letter and information on notice period, garden leave, and reference ready.

3. Choose the timing

   Hold the conversation in person, privately or with one other person present, not right before a holiday and not in passing.

4. Outcome first

   Say within the first two minutes that the employment is ending. Give the reasons briefly and factually, without putting the decision up for discussion.

5. Listen

   Leave room for reactions. Do not interrupt and do not defend yourself. Answer questions honestly, including with "I don't know yet."

6. Name the next steps

   Explain notice period, garden leave, reference, and the date for a second conversation on the formalities.

7. Inform the team

   Inform the team the same day, factually and without details that expose the person. Agree with the person affected beforehand on what will be said.

For the conversation itself, the same applies as for other bad news. The five-sentence framework from the guide Delivering bad news helps to formulate the core message clearly: what is happening, what it means, why, what happens now, and when you will talk again.

After the separation: the team that stays

The meta-analysis by van Dierendonck and Jacobs shows that those who stay watch closely how a separation unfolds. For them, a colleague's dismissal is information about their own employer. Three things help preserve their trust.

• Openness about the reason, as far as the dignity of the person affected allows. For operational reasons, also an honest statement on whether further separations are likely.
• Clarity about the work the person leaves behind. Who takes over which customers and tasks, and what is dropped?
• Offers to talk for individuals affected by the separation, for example because they worked closely with the person.

In the long run, the best prevention is good hiring and onboarding. The guide Onboarding new employees describes a plan for the first 90 days that helps identify poor fits early, and the article Employee retention in a small business shows what keeps good people.

Conclusion: how does a decent separation succeed?

The opening question was
an owner parts with an employee so that the separation is legally sound, humanly decent, and comprehensible to the team. It becomes legally sound through written form, correct notice periods, a viable reason, and advice before the step. It becomes decent and comprehensible through the three sides of fairness: an appropriate outcome, a procedure following clear rules, and respectful treatment.

The studies show that procedure and treatment above all determine how those affected and those who stay judge the separation, and that explanations only work if the employer was seen as having integrity beforehand. A decent separation therefore begins long before the conversation, with honest feedback and conduct that gives weight to the owner's word.

For this week, one step is enough: check whether there is an employment relationship in the business where you have seen problems for months but never spoken about them clearly. Then the first conversation is not a separation conversation but honest feedback.