Termination of Contract Letter: Some Useful Tips & Templates

Written by Julian Canlas

Termination of contract letter

Having a proper termination process within your company is just as important as hiring and onboarding – and notifying people is an important part of the termination process. So in this article, we’ll be sharing some tips and templates to guide you in drafting up professional contract termination letters. 

Contract termination is inevitable in every company. For a contract termination to be effective, there needs to be a written and signed record. For this reason, contract termination letters are drafted to notify the involved parties and serve as proof for compliance purposes. In this article example, we’ll provide a contract termination letter for employees and another one for contractors who have breached a clause.

How To Write It

What Should You Include In A Contract Termination Letter?

  • Date of letter.
  • Address of responsible party
  • Salutations: Dear [responsible party]
  • Date where termination is in effect
  • Reasons for termination with explanations. Examples: downsizing, behavior, end of contract, etc.
  • Any relevant statutes and laws to support your claims — Consider any unethical practices, fraud, or breach of contract involved according to the relevant laws. 
  • Any compensation and benefits involved 
  • Goodwill closing statement 
  • Contact information 

What Should You Be Avoiding In A Contract Termination Letter? 

  • Unnecessary information
  • Casual and informal language
  • Inaccurate or exaggerated information

When drafting contract termination letters, you need to observe a respectful, civil and appropriate tone. Being laid off is already an upsetting experience. You do not want to appear cold, overly emotional and patronizing. Stay professional. 

Employment Contract Termination Letter Template

[Date of letter]

[Employee address]

Dear [employee involved],

This letter serves to inform you that your employment contract with [company name] will end as of [date where termination is in effect/end of existing employment contract]. 

After careful consideration and discussion, we have decided [not to go ahead with the contract renewal/early termination] for the following reasons: [state reasons with explanations]. 

This decision is final, and you will receive your [final paycheck, severance pay and other compensations]. You are also required to return [any loaned company property and other items] before the last day of your employment. 

Please sign and return a copy of the attached document as a prerequisite for you to claim the above compensation. You are reminded to observe the confidentiality agreements signed at the start of the employment contract. 

A representative from our human resource department will be contacting you in the upcoming week to discuss your severance and compensation benefits. They will also be providing you with resources to assist in your job search. If you have any inquiries, you can contact your [representative name], at [contact details — phone/email].

We would like to thank you for your time and contribution towards the growth of [company name] throughout your employment. 

Best Regards,

[Name]

Contractor Partnership Termination Letter Template For Breach Of Contract

[Date of letter]

[Contracting company]

[Address]

Attention: [Liaison from contracting company]

Dear [Liaison from corresponding company],

We are writing to regretfully inform you that as of [date of effective termination], we will be terminating our existing contract with you concerning [essence of contract]. 

We have discovered a breach of contract regulations according to [relevant terms, statutes, warranties of contract]. With reference to the dispute handling procedures discussed earlier in [statute], you have been given ample time to remedy the breach. 

This period has expired, and (little/no) action has been observed to cure the breach. Our company has no tolerance for unnecessary upside risks and due to the breach of the terms stated above, the contract termination will be in effect immediately. 

Please contact us if you have further questions. 

Best Regards,

[Name]

[Company]

Tips For Writing Termination Of Contract Letters 

Consult your legal team when proofreading

Get your legal team to review the final draft of the termination letter before sending it out. This ensures that your letter is non-negotiable, and has abided by all relevant employment laws and policies involved. It is better to exercise caution rather than end up having to spend money clearing up any miscommunications in court. 

Be clear about your legal obligations

Your company may be part of a trade/labor union, which means that there are specific conditions, terms or internal guidelines that your company has to observe. Before writing the termination letter, review all relevant documents and double check that your reasons for termination does not involve discrimination against any race, gender, age, etc. 

Make sure to pen down what happens next. 

This gives the employee a better idea of what they need to do before the effective termination date and what they will receive as compensation. It would be a good practice to include details of these items in the termination letter, or a separate follow-up letter/email:

  • Final pay — Specify date and amount of payout.
  • Severance payment — Include if your company has a severance package for laid off workers.
  • Compensation package related items — Remaining unclaimed annual leaves converted into paid days. 
  • Any continuation of benefits — Can existing insurance plans be continued months after contract termination? 
  • Company property that needs to be returned — Any staff passes, laptops, equipment, etc. that need to be returned.

Ensure reasons for termination are well explained.

It is only right to give the employee a clear explanation as to why they are being laid off. Give an objective and verifiable reason that is short and concise. You ideally need to specify why you’ve decided to terminate. For example, 

  • Financial troubles (downsizing), 
  • Behavior (e.g., bad performance) with reference to any performance measurement criteria 
  • End of specified contract date. 

Disclosing too much information could work against you if the issue is brought to the court for settlement.

Provide support and recommendations where necessary.

Display compassion and empathy by following up with the employee and suggesting ways they can reach out for help or career guidance. 

Let the employee or contractor know if there are certain outplacement services that your company provides. For the employee,, provide suggestions on programs that they can join with subsidized fees to upskill before continuing their job search. 

Build your contract and template repository with Contract Hound.

With a centralized repository of contracts and templates, employees no longer need to spend time searching for displaced legal documents. Improve work productivity and standardize contract workflows with us today. 

Published

May 10, 2021

Writer

Julian Canlas

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